The Stochastic Finite Element Method and Application in Option Pricing
AbstractThe purpose of this paper is to present a numerical method to solve partial stochastic differential equations. This concept remains the differential operator unchanged but discretizes the dimension of the problem. The response function will be decomposed by the Karhunen--Loeve expansion and approximated by deterministic base functions and Homogeneous Chaos. Application to option pricing will be made.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 429.
Date of creation:
Date of revision: Mar 1998
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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de/index.php?id=517
Stochastic Differential Equations; Stochastic Finite Element Method; Homogeneous Chaos; Karhunen--Loeve expansion; Option Pricing; Numerical Method;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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