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Pricing Overnight Index Swap in a Large Market Model Using a Cubature Method
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics. (MAM)ORCID iD: 0000-0001-9303-1196
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics. (MAM)ORCID iD: 0000-0002-0139-0747
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics.ORCID iD: 0000-0002-0835-7536
Mälardalen University, School of Education, Culture and Communication, Educational Sciences and Mathematics.ORCID iD: 0000-0002-1624-5147
2019 (English)In: Booklet of abstracts SPAS 2019 2nd Edition of the International Conference on Stochastic Processes and Algebraic Structures: From Theory Towards Applications, 2019Conference paper, Oral presentation with published abstract (Other academic)
Abstract [en]

Cubature is an effective way to calculate integrals in a finite dimensional space. Extending the idea of cubature to the infinite-dimensional Wiener space would have practical usages in pricing financial instruments. In this paper, we calculate and use cubature formulae of degree 5 and 7 on Wiener space to price European options in the classical Black–Scholes model. This problem has a closed form solution and thus we will compare the obtained numerical results with the above solution. In this procedure, we study some characteristics of the obtained cubature formulae and discuss some of their applications to pricing American options.

Place, publisher, year, edition, pages
2019.
Keywords [en]
cubature formulae, cubature method, Wiener space, Black–Scholes model, multi-nomial tree approximation
National Category
Probability Theory and Statistics
Research subject
Mathematics/Applied Mathematics
Identifiers
URN: urn:nbn:se:mdh:diva-52174OAI: oai:DiVA.org:mdh-52174DiVA, id: diva2:1484602
Conference
2nd International Conference on Stochastic Processes and Algebraic Structures–From Theory Towards Applications, Västerås, Sweden, 30/9-2/10 2019
Available from: 2020-10-29 Created: 2020-10-29 Last updated: 2022-09-16Bibliographically approved

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https://spas2019.files.wordpress.com/2019/09/spas2019_book_of_abstracts.pdf

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Nohrouzian, HosseinMalyarenko, AnatoliyNi, YingEngström, Christopher

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  • ieee
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Language
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  • fi-FI
  • nn-NO
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