Wavelet based Multi-grid analysis, Wavelet Galerkin method and their Applications to American option: A Survey
AbstractThis paper surveys the literatures on numerical methods from its origins to present to evaluate American-style claims. An extensive review of numerical meth- ods is provided. In particular, emphases is placed on recent trends and developments in the multi-grid and Galerkin method with the Wavelet basis for American option. Mainly, this paper considers two wavelet based numerical methods. One is that the wavelet basis is used in the restriction and the prolongation in terms of the multi- grid method. The other is the discretization of the components of the Dirichlet problem and the test function in the Galerkin formulation. For the applications of their methods to American option, there are some papers by using the Wavelet Galerkin method with the fixed point iteration method. The multi-grid method without using the Wavelet basis is also used in the American option. It, however, seems that there are not enough studies which are applied to the pricing of Ameri- can options with the wavelet basis.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-26.
Length: 51 pages
Date of creation: Oct 2005
Date of revision:
American option; multi-grid methods; wavelet analysis; multiresolution analysis.;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-08 (All new papers)
- NEP-CMP-2005-10-08 (Computational Economics)
- NEP-ETS-2005-10-08 (Econometric Time Series)
- NEP-FIN-2005-10-08 (Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tomas Björk & Yuri Kabanov & Wolfgang Runggaldier, 1997. "Bond Market Structure in the Presence of Marked Point Processes," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 211-239.
- Stephane Villeneuve, 1999. "Exercise regions of American options on several assets," Finance and Stochastics, Springer, vol. 3(3), pages 295-322.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
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