A Multilevel Approach To Solving The Black–Scholes Equation
AbstractIn this manuscript, we develop a multilevel framework for the pricing of a European call option based on multiresolution techniques. In this approach, the Black–Scholes equation is transformed via finite differences into a system of linear equations, where the form of the implicit operator is used to construct coarse grid projectors. The reduction of the computational resource is achieved by truncating small wavelet coefficients. However, because traditional wavelets fail to prevent oscillations from developing in the Greeks, a multilevel approach is used to retain smoothness in Gamma by incorporating derivative information into the multiresolution analysis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 13 (2010)
Issue (Month): 03 ()
Contact details of provider:
Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).
If references are entirely missing, you can add them using this form.