کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
4641873 | 1341322 | 2008 | 12 صفحه PDF | دانلود رایگان |
In this paper, we have derived a radial basis function (RBF) based method for the pricing of financial contracts by solving the Black–Scholes partial differential equation. As an example of a financial contract that can be priced with this method we have chosen the multi-dimensional European basket call option. We have shown numerically that our scheme is second-order accurate in time and spectrally accurate in space for constant shape parameter. For other non-optimal choices of shape parameter values, the resulting convergence rate is algebraic. We propose an adapted node point placement that improves the accuracy compared with a uniform distribution. Compared with an adaptive finite difference method, the RBF method is 20–40 times faster in one and two space dimensions and has approximately the same memory requirements.
Journal: Journal of Computational and Applied Mathematics - Volume 222, Issue 1, 1 December 2008, Pages 82–93