Advanced Search
MyIDEAS: Login to save this paper or follow this series

Model Reduction Methods In Option Pricing

Contents:

Author Info

  • Antonio Falcó

    ()
    (Universidad CEU Cardenal Herrera)

  • Francisco Chinesta

    ()
    (CNRS-ENSAM-ESEM)

  • Mariano González

    ()
    (Universidad CEU San Pablo)

Abstract

In this work we introduce the Proper Orthogonal Decomposition (POD)approach to the valuation of contingent claims for one–dimensional price models.First, we present the POD in the context of an abstract Hilbert space and we givean application for the numerical pricing of Double Barrier Options. In a finitedimension setting, we show the model reduction method for Finite Differenceschemes of implicit type. In particular, we construct the reduced version of theCrank–Nicolson scheme and some numerical examples are given.

Download Info

If 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.
File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-16.pdf
File Function: Fisrt version / Primera version, 2006
Download Restriction: no

Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2006-16.

as in new window
Length: 27 pages
Date of creation: Jul 2006
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2006-16

Contact details of provider:
Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Email:
Web page: http://www.ivie.es/
More information through EDIRC

Related research

Keywords: Model Reduction; Proper Orthogonal Decomposition; Finite Difference Schemes; Crank–Nicolson Scheme.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2006-16. See general 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: (Departamento de Edición).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.