Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5054481 | Economic Modelling | 2013 | 4 Pages |
Abstract
This paper presents a European option pricing model by applying the Model-Order-Reduction (MOR) method. A European option pricing theorem based on Black-Scholes' equation is implemented by the Finite-Difference Method (FDM). However, the numerical models generated by the FDM could be simplified through the MOR technique, which is based on the concept of an Arnoldi-based Model-Order Reduction algorithm. In terms of computational cost, the MOR models are at least 2 orders of magnitude faster than the original FDM models with a negligible compromise in accuracy.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Shao-Bin Lin, Chun-Da Chen,