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Testing Cubature Formulae on Wiener Space vs Explicit Pricing Formulae
Mälardalen University, Västerås, Sweden.ORCID iD: 0000-0001-9303-1196
Mälardalen University, Västerås, Sweden.ORCID iD: 0000-0002-0139-0747
2023 (English)In: Stochastic Processes, Statistical Methods, and Engineering Mathematics / [ed] Anatoliy Malyarenko, Ying Ni, Milica Rančić, Sergei Silvestrov, Springer Nature, 2023, p. 223-248Chapter in book (Refereed)
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
Springer Nature, 2023. p. 223-248
Series
Springer Proceedings in Mathematics & Statistics, ISSN 2194-1009, E-ISSN 2194-1017 ; 408
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:liu:diva-203006DOI: 10.1007/978-3-031-17820-7_12Scopus ID: 2-s2.0-85171598661ISBN: 9783031178191 (print)ISBN: 9783031178207 (electronic)OAI: oai:DiVA.org:liu-203006DiVA, id: diva2:1853955
Available from: 2024-04-24 Created: 2024-04-24 Last updated: 2024-10-28Bibliographically approved

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Nohrouzian, Hossein

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Probability Theory and Statistics

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