Wavelet Optimized Valuation Of Financial Derivatives
We introduce a simple but efficient PDE method that makes use of interpolation wavelets for their advantages in compression and interpolation in order to define a sparse computational domain. It uses finite difference filters for approximate differentiation, which provide us with a simple and sparse stiffness matrix for the discrete system. Since the method only uses a nodal basis, the application of non-constant terms, boundary conditions and free-boundary conditions is straightforward. We give empirical results for financial products from the equity and fixed income markets in 1, 2 and 3 dimensions and show a speed-up factor between 2 and 4 with no significant reduction of precision.
Volume (Year): 14 (2011)
Issue (Month): 07 ()
|Contact details of provider:|| Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml|
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:14:y:2011:i:07:p:1113-1137. 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: (Tai Tone Lim)
If references are entirely missing, you can add them using this form.