Krylov subspace reduction and its extensions for option pricing

Vladimir Druskin and Leonid Knizhnerman, Tanya Tamarchenko and Sergio Kostek

Journal of Computational Finance

Abstract: ABSTRACT Computationally expensive time-stepping is the bottleneck of finite-difference methods used for valuing multi-asset options. The authors consider a novel algorithm with radically accelerated convergence, which is based on an optimal approximation of the matrix exponential. This algorithm is modified to compute the price of American options. A reduction of one order in computational time compared with one of the most efficient variants of the Crank-Nicolson scheme is observed with a two-factor convertible bond model.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-computational-fina ... s-for-option-pricing (text/html)

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:rsk:journ0:2160538

Access Statistics for this article

More articles in Journal of Computational Finance from Journal of Computational Finance
Bibliographic data for series maintained by Thomas Paine ().