Multidimensional Diffusion Models

Norbert Hilber, Oleg Reichmann, Christoph Schwab and Christoph Winter
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Norbert Hilber: Zurich University of Applied Sciences
Oleg Reichmann: Swiss Federal Institute of Technology (ETH)
Christoph Schwab: Swiss Federal Institute of Technology (ETH)
Christoph Winter: Allianz Deutschland AG

Chapter Chapter 13 in Computational Methods for Quantitative Finance, 2013, pp 177-196 from Springer

Abstract: Abstract In the present chapter, we develop efficient pricing algorithms for multivariate problems, such as the pricing of multi-asset options and the pricing of options in stochastic volatility models, which exploit a third feature of the wavelet basis, namely that wavelets constitute a hierarchic basis of the univariate finite element space. This allows constructing the so-called sparse tensor product subspaces for the numerical solution of d-dimensional pricing problems with complexity essentially equal to that of one-dimensional problems.

Keywords: Sparse Grid; Stochastic Volatility Model; Scholes Model; Tensor Product Space; Full Grid (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-642-35401-4_13

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DOI: 10.1007/978-3-642-35401-4_13

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