IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Meshfree Approximation for Multi-Asset Options

Listed author(s):
  • Emmanuel Hanert

    (Départment des sciences du milieu et de l'aménagement du territoire, Université catholique de Louvain)

  • Aanand Venkatramanan


    (ICMA Centre, University of Reading)

Registered author(s):

    We price multi-asset options by solving their price partial differential equations using a meshfree approach with radial basis functions under jump-diffusion and geometric Brownian motion frameworks. In the geometric Brownian motion framework, we propose an effective technique that breaks the multi-dimensional problem to multiple 3D problems. We solve the price PDEs or PIDEs with an implicit meshfree scheme using thin-plate radial basis functions. Meshfree approach is very accurate, has high order of convergence and is easily scalable and adaptable to higher dimensions and different payoff profiles. We also obtain closed form approximations for the option Greeks. We test the model on American crack spread options traded on NYMEX.

    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:
    Download Restriction: no

    Paper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2009-07.

    in new window

    Length: 22 pages
    Date of creation: Jul 2008
    Date of revision: Jun 2009
    Handle: RePEc:rdg:icmadp:icma-dp2009-07
    Contact details of provider: Postal:
    PO Box 218, Whiteknights, Reading, Berks, RG6 6AA

    Phone: +44 (0) 118 378 8226
    Fax: +44 (0) 118 975 0236
    Web page:

    More information through EDIRC

    References listed on IDEAS
    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.:

    in new window

    1. Carol Alexander & Aanand Venkatramanan, 2007. "Analytic Approximations for Spread Options," ICMA Centre Discussion Papers in Finance icma-dp2007-11, Henley Business School, Reading University.
    2. Carol Alexander & Aanand Venkatramanan, 2008. "Analytic Approximations for Multi-Asset Option Pricing," ICMA Centre Discussion Papers in Finance icma-dp2009-05, Henley Business School, Reading University, revised Jun 2009.
    3. Szymon Borak & Kai Detlefsen & Wolfgang Härdle, 2005. "FFT Based Option Pricing," SFB 649 Discussion Papers SFB649DP2005-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:rdg:icmadp:icma-dp2009-07. 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: (Marie Pearson)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.