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A Numerical Method to Approximate Multi-Asset Option Pricing Under Exponential Lévy Model

Author

Listed:
  • Leila Khodayari

    (Azarbaijan Shahid Madani University)

  • Mojtaba Ranjbar

    (Azarbaijan Shahid Madani University)

Abstract

In this paper, a modification of the original global radial basis functions-based differential quadrature (RBF-DQ) method is set forth and analyzed. The improved RBF-DQ method is applicable to the numerical approximation of solutions of a wide range of partial differential equations with mixed derivative terms. However, it appears to be considerably faster than the original method. In support of this contention, the multi-asset option pricing problems under exponential Lévy framework have been solved numerically by using the proposed method and compared with results obtained via the original RBF-DQ method. For accuracy achieved versus work expended, the improved method performs better.

Suggested Citation

  • Leila Khodayari & Mojtaba Ranjbar, 2017. "A Numerical Method to Approximate Multi-Asset Option Pricing Under Exponential Lévy Model," Computational Economics, Springer;Society for Computational Economics, vol. 50(2), pages 189-205, August.
    • Handle: RePEc:kap:compec:v:50:y:2017:i:2:d:10.1007_s10614-016-9605-0
    DOI: 10.1007/s10614-016-9605-0
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    References listed on IDEAS

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