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Multivariate Option Pricing Using Quasi-interpolation Based on Radial Basis Functions

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Advanced Intelligent Computing Theories and Applications. With Aspects of Theoretical and Methodological Issues (ICIC 2008)

Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 5226))

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Abstract

Radial basis functions are well-known successful tools for interpolation and quasi-interpolation of the equal distance or scattered data in high dimensions. Furthermore, their truly mesh-free nature motivated researchers to use them to deal with partial differential equations(PDEs). With more than twenty-year development, radial basis functions have become a powerful and popular method in solving ordinary and partial differential equations now. In this paper, based on the idea of quasi-interpolation and radial basis functions approximation, a fast and accurate numerical method is developed for multi-dimensions Black-Scholes equation for valuation of european options prices on three underlying assets. The advantage of this method is that it does not require solving a resultant full matrix, therefore as indicated in the the numerical computation, this method is effective for option pricing problem.

The project is supported by NSF of China(10471109).

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Author information

Authors and Affiliations

  1. School of Science, Xi’an Jiaotong University, Xi’an, 710049, P.R. China

    Liquan Mei & Peipei Cheng

Authors
  1. Liquan Mei
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  2. Peipei Cheng
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Editor information

Editors and Affiliations

  1. Department of Automation, University of Science and Technology of China, 230026, Hefei, Anhui, China

    De-Shuang Huang

  2. Applied Computational Intelligence Laboratory, P.O. Box

    Donald C. Wunsch II

  3. Arlington, USA

    Daniel S. Levine

  4. Graduate School of Electrical Engineering, University of Ulsan, Korea, San 29, Mugeo-Dong, 680 - 749, Nam-Ku, Ulsan, Korea

    Kang-Hyun Jo

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© 2008 Springer-Verlag Berlin Heidelberg

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Mei, L., Cheng, P. (2008). Multivariate Option Pricing Using Quasi-interpolation Based on Radial Basis Functions. In: Huang, DS., Wunsch, D.C., Levine, D.S., Jo, KH. (eds) Advanced Intelligent Computing Theories and Applications. With Aspects of Theoretical and Methodological Issues. ICIC 2008. Lecture Notes in Computer Science, vol 5226. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-87442-3_77

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  • DOI: https://doi.org/10.1007/978-3-540-87442-3_77

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-87440-9

  • Online ISBN: 978-3-540-87442-3

  • eBook Packages: Computer ScienceComputer Science (R0)

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