Pricing Basket Options by Polynomial Approximations

Pablo Olivares and Alexander Alvarez

Journal of Applied Mathematics, 2016, vol. 2016, 1-12

Abstract:

We propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model. The method is based on Taylor and Chebyshev expansions and involves mixed exponential-power moments of a Gaussian distribution. Our numerical results show that both approaches are comparable in accuracy to a standard Monte Carlo method, with a lesser computational effort.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://downloads.hindawi.com/journals/JAM/2016/9747394.pdf (application/pdf)
http://downloads.hindawi.com/journals/JAM/2016/9747394.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnljam:9747394

DOI: 10.1155/2016/9747394

Access Statistics for this article

More articles in Journal of Applied Mathematics from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().