Limitations and improvements of standard spectral methods for pricing standard options

DOI10.1007/S12572-015-0140-3MaRDI QIDQ531074zbMATH OpenOpenAlexFDO

Authors E. Ngounda, Kailash C. Patidar

Publication date 3 August 2016

Published in International Journal of Advances in Engineering Sciences and Applied Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s12572-015-0140-3

zbMATH Keywords

Laplace transformspectral methodsAmerican optionsexponential time differencingcontour integrals

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Spectral, collocation and related methods for initial value and initial-boundary value problems involving PDEs (65M70)

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• A new spectral element method for pricing European options under the Black-Scholes and Merton jump diffusion models

Cites work

• A Fast Numerical Method for the Black--Scholes Equation of American Options
• A Rational Spectral Collocation Method with Adaptively Transformed Chebyshev Grid Points
• An exact and explicit solution for the valuation of American put options
• Contour integral method for European options with jumps
• Derivative securities and difference methods.
• Explicit Exponential Runge--Kutta Methods for Semilinear Parabolic Problems
• Exponential Integrators for Large Systems of Differential Equations
• Exponential convergence of a linear rational interpolant between transformed Chebyshev points
• Exponential time differencing for stiff systems
• Front-tracking finite difference methods for the valuation of American options
• Laplace transforms and American options
• Numerical pricing of options using high-order compact finite difference schemes
• Optimal exercise boundary for an American put option
• Option pricing: A simplified approach
• Parabolic and hyperbolic contours for computing the Bromwich integral
• Quadratic convergence for valuing American options using a penalty method
• Rational interpolation through the optimal attachment of poles to the interpolating polynomial
• Some New Aspects of Rational Interpolation
• Spectral Methods in MATLAB
• The Accurate Numerical Inversion of Laplace Transforms

Cited in

(2)

• On a semi-spectral method for pricing an option on a mean-reverting asset
• Implicit-explicit predictor-corrector methods combined with improved spectral methods for pricing European style vanilla and exotic options

Describes a project that uses

Uses Software

• Matlab

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