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dc.contributor.authorBalajewicz, Maciej
dc.contributor.authorToivanen, Jari
dc.date.accessioned2017-05-31T12:07:16Z
dc.date.available2019-01-20T22:35:32Z
dc.date.issued2017
dc.identifier.citationBalajewicz, M., & Toivanen, J. (2017). Reduced Order Models for Pricing European and American Options under Stochastic Volatility and Jump-Diffusion Models. <i>Journal of Computational Science</i>, <i>20</i>, 198-204. <a href="https://doi.org/10.1016/j.jocs.2017.01.004" target="_blank">https://doi.org/10.1016/j.jocs.2017.01.004</a>
dc.identifier.otherCONVID_26496934
dc.identifier.otherTUTKAID_72708
dc.identifier.urihttps://jyx.jyu.fi/handle/123456789/54219
dc.description.abstractEuropean options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like the Heston, Merton, and Bates models. American option prices can be obtained by solving linear complementary problems (LCPs) with the same operators. A finite difference discretization leads to a so-called full order model (FOM). Reduced order models (ROMs) are derived employing proper orthogonal decomposition (POD). The early exercise constraint of American options is enforced by a penalty on subset of grid points. The presented numerical experiments demonstrate that pricing with ROMs can be orders of magnitude faster within a given model parameter variation range.
dc.language.isoeng
dc.publisherElsevier
dc.relation.ispartofseriesJournal of Computational Science
dc.subject.otherreduced order model
dc.subject.otheroption pricing
dc.subject.otherEuropean option
dc.subject.otherAmerican option
dc.subject.otherlinear complementary problem
dc.titleReduced Order Models for Pricing European and American Options under Stochastic Volatility and Jump-Diffusion Models
dc.typearticle
dc.identifier.urnURN:NBN:fi:jyu-201705302571
dc.contributor.laitosInformaatioteknologian tiedekuntafi
dc.contributor.laitosFaculty of Information Technologyen
dc.contributor.oppiaineTietotekniikkafi
dc.contributor.oppiaineMathematical Information Technologyen
dc.type.urihttp://purl.org/eprint/type/JournalArticle
dc.date.updated2017-05-30T12:15:20Z
dc.type.coarjournal article
dc.description.reviewstatuspeerReviewed
dc.format.pagerange198-204
dc.relation.issn1877-7503
dc.relation.numberinseries0
dc.relation.volume20
dc.type.versionacceptedVersion
dc.rights.copyright© 2017 Elsevier B.V. This is a final draft version of an article whose final and definitive form has been published by Elsevier. Published in this repository with the kind permission of the publisher.
dc.rights.accesslevelopenAccessfi
dc.relation.doi10.1016/j.jocs.2017.01.004


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