Chebyshev Interpolation for Parametric Option Pricing
| Autor: | Gaß, Maximilian, Glau, Kathrin, Mahlstedt, Mirco, Mair, Maximilian |
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| Rok vydání: | 2015 |
| Předmět: | |
| Druh dokumentu: | Working Paper |
| Popis: | Recurrent tasks such as pricing, calibration and risk assessment need to be executed accurately and in real-time. Simultaneously we observe an increase in model sophistication on the one hand and growing demands on the quality of risk management on the other. To address the resulting computational challenges, it is natural to exploit the recurrent nature of these tasks. We concentrate on Parametric Option Pricing (POP) and show that polynomial interpolation in the parameter space promises to reduce run-times while maintaining accuracy. The attractive properties of Chebyshev interpolation and its tensorized extension enable us to identify criteria for (sub)exponential convergence and explicit error bounds. We show that these results apply to a variety of European (basket) options and affine asset models. Numerical experiments confirm our findings. Exploring the potential of the method further, we empirically investigate the efficiency of the Chebyshev method for multivariate and path-dependent options. Comment: Multivariate Option Pricing, Complexity Reduction, (Tensorized) Chebyshev Polynomials, Polynomial Interpolation, Fourier Transform Methods, Monte Carlo, Affine Processes |
| Databáze: | arXiv |
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