A Reduced Basis Method for the Simulation of American Options

B. Haasdonk (), J. Salomon () and B. Wohlmuth ()
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B. Haasdonk: Universität Stuttgart, IANS
J. Salomon: Université Paris-Dauphine, CEREMADE
B. Wohlmuth: Technische Universität München, M2 – Zentrum Mathematik

A chapter in Numerical Mathematics and Advanced Applications 2011, 2013, pp 821-829 from Springer

Abstract: Abstract We present a reduced basis method for the simulation of American option pricing. To tackle this model numerically, we formulate the problem in terms of a time dependent variational inequality. Characteristic ingredients are a POD-greedy and an angle-greedy procedure for the construction of the primal and dual reduced spaces. Numerical examples are provided, illustrating the approximation quality and convergence of our approach.

Keywords: Variational Inequality; Proper Orthogonal Decomposition; American Option; Reduce Basis; Parabolic Partial Differential Equation (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-33134-3_85

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DOI: 10.1007/978-3-642-33134-3_85

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