Radial Basis Functions with Partition of Unity Method for American Options with Stochastic Volatility

Citeable URL: https://ir.library.oregonstate.edu/concern/articles/vx021m22x

Descriptions

Attribute Name	Values
Creator	Mollapourasl, Reza Fereshtian, Ali Vanmaele, Michele
Abstract	In this article, we price American options under Heston's stochastic volatility model using a radial basis function (RBF) with partition of unity method (PUM) applied to a linear complementary formulation of the free boundary partial differential equation problem. RBF-PUMs are local meshfree methods that are accurate and flexible with respect to the problem geometry and that produce algebraic problems with sparse matrices which have a moderate condition number. Next, a Crank-Nicolson time discretisation is combined with the operator splitting method to get a fully discrete problem. To better control the computational cost and the accuracy, adaptivity is used in the spatial discretisation. Numerical experiments illustrate the accuracy and efficiency of the proposed algorithm.
License	Attribution 4.0 (CC BY 4.0)
Resource Type	Article
DOI	https://doi.org/10.1007/s10614-017-9739-8
Date Issued	2019-01
Journal Title	Computational Economics
Journal Volume	53
Rights Statement	In Copyright
Language	English [eng]
ISSN	0927-7099