Localized radial basis functions for no-arbitrage pricing of options under stochastic alpha-beta-rho dynamics

DOI10.1017/S1446181121000237zbMATH Open1481.65159OpenAlexW4247465288MaRDI QIDQ5158754FDOQ5158754

Authors:

Publication date: 26 October 2021

Published in: The ANZIAM Journal (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1017/s1446181121000237

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zbMATH Keywords

financial optionsno-arbitrage priceslocal radial basis functionsstochastic alpha-beta-rho model

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91) PDEs with randomness, stochastic partial differential equations (35R60) Finite difference methods for initial value and initial-boundary value problems involving PDEs (65M06) Spectral, collocation and related methods for boundary value problems involving PDEs (65N35) Numerical radial basis function approximation (65D12)

Cites Work

• The pricing of options and corporate liabilities
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• Evaluating matrix functions for exponential integrators via Carathéodory-Fejér approximation and contour integrals
• A predictor-corrector scheme based on the ADI method for pricing american puts with stochastic volatility
• On stability of numerical schemes via frozen coefficients and the magnetic induction equations
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• RBF-FD formulas and convergence properties
• Approximate arbitrage-free option pricing under the SABR model
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• Exact simulation of the SABR model
• Inverse multi-quadric RBF for computing the weights of FD method: application to American options
• High-order ADI scheme for option pricing in stochastic volatility models
• RBF-FD schemes for option valuation under models with price-dependent and stochastic volatility
• The sample solution approach for determination of the optimal shape parameter in the multiquadric function of the Kansa method
• The principle of not feeling the boundary for the SABR model
• PDE methods for SABR
• The survival probability of the SABR model: asymptotics and application

Cited In (2)

• A novel local meshless scheme based on the radial basis function for pricing multi-asset options
• A radial basis function -- Hermite finite difference approach to tackle cash-or-nothing and asset-or-nothing options

Uses Software

• Matlab

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