| Title: | Solution of option pricing equations using orthogonal polynomial expansion |
| Authors: | Baustian, Falko Filipová, Kateřina Pospíšil, Jan |
| Citation: | BAUSTIAN, F. FILIPOVÁ, K. POSPÍŠIL, J. Solution of option pricing equations using orthogonal polynomial expansion. Applications of Mathematics, 2021, roč. 66, č. 4, s. 553-582. ISSN: 0862-7940 |
| Issue Date: | 2021 |
| Publisher: | Springer |
| Document type: | postprint postprint |
| URI: | 2-s2.0-85103659388 http://hdl.handle.net/11025/46650 |
| ISSN: | 0862-7940 |
| Keywords in different language: | orthogonal polynomial expansion;Hermite polynomials;Laguerre polynomials;Heston model;option pricing |
| Abstract in different language: | In this paper we study both analytic and numerical solutions of option pricing equations using systems of orthogonal polynomials. Using a Galerkin-based method, we solve the parabolic partial diferential equation for the Black-Scholes model using Hermite polynomials and for the Heston model using Hermite and Laguerre polynomials. We compare obtained solutions to existing semi-closed pricing formulas. Special attention is paid to the solution of Heston model at the boundary with vanishing volatility. |
| Rights: | © Institute of Mathematics, Czech Academy of Sciences 2021 |
| Appears in Collections: | Články / Articles (KMA) OBD |
Files in This Item:
| File | Size | Format | |
|---|---|---|---|
| BaustianFilipovaPospisil21am_accepted.pdf | 1,05 MB | Adobe PDF | View/Open |
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