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A New Method For Generating Approximation Algorithms For Financial Mathematics Applications

Fabozzi, Frank J., Leccadito, Arturo, Tunaru, Radu (2012) A New Method For Generating Approximation Algorithms For Financial Mathematics Applications. Quantitative Finance, . pp. 1-13. ISSN 1469-7688. (doi:10.1080/14697688.2011.580363) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:28646)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
http://dx.doi.org/10.1080/14697688.2011.580363

Abstract

This paper describes a new technique that can be used in financial mathematics for a wide range of situations where the calculation of complicated integrals is required. The numerical schemes proposed here are deterministic in nature but their proof relies on known results from probability theory regarding the weak convergence of probability measures. We adapt those results to unbounded payoffs under certain mild assumptions that are satisfied in finance. Because our approximation schemes avoid repeated simulations and provide computational savings, they can potentially be used when calculating simultaneously the price of several derivatives contingent on the same underlying. We show how to apply the new methods to calculate the price of spread options and American call options on a stock paying a known dividend. The method proves useful for calculations related to the log-Weibull model proposed recently for empirical asset pricing.

Item Type: Article
DOI/Identification number: 10.1080/14697688.2011.580363
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Catherine Norman
Date Deposited: 02 Feb 2012 16:00 UTC
Last Modified: 16 Nov 2021 10:06 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/28646 (The current URI for this page, for reference purposes)

University of Kent Author Information

Tunaru, Radu.

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