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Efficient hierarchical approximation of high-dimensional option pricing problems

Abstract:

A major challenge in computational finance is the pricing of options that depend on a large number of risk factors. Prominent examples are basket or index options where dozens or even hundreds of stocks constitute the underlying asset and determine the dimensionality of the corresponding degenerate parabolic equation. The objective of this article is to show how an efficient discretisation can be achieved by hierarchical approximation as well as asymptotic expansions of the underlying continu...

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Publication date:
2005-01-01
UUID:
uuid:37441acc-77a5-4327-b4c0-472cc865f866
Local pid:
oai:eprints.maths.ox.ac.uk:242
Deposit date:
2011-05-19

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