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Multi-dimensional option pricing using radial basis functions and the generalized Fourier transform
Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Information Technology, Division of Scientific Computing. Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Information Technology, Numerical Analysis. (ndim)
Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Information Technology, Division of Scientific Computing. Uppsala University, Disciplinary Domain of Science and Technology, Mathematics and Computer Science, Department of Information Technology, Numerical Analysis. (ANLA)
2006 (English)Report (Other academic)
Abstract [en]

We show that the generalized Fourier transform can be used for reducing the computational cost and memory requirements of radial basis function methods for multi-dimensional option pricing. We derive a general algorithm, including a transformation of the Black-Scholes equation into the heat equation, that can be used in any number of dimensions. Numerical experiments in two and three dimensions show that the gain is substantial even for small problem sizes. Furthermore, the gain increases with the number of dimensions.

Place, publisher, year, edition, pages
2006.
Series
Technical report / Department of Information Technology, Uppsala University, ISSN 1404-3203 ; 2006-037
National Category
Computational Mathematics Computer Sciences
Identifiers
URN: urn:nbn:se:uu:diva-81282OAI: oai:DiVA.org:uu-81282DiVA, id: diva2:109197
Available from: 2008-02-15 Created: 2008-02-15 Last updated: 2024-05-31Bibliographically approved

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fulltext(564 kB)58 downloads
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Larsson, ElisabethÅhlander, Krister

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf