scholarly journals Pricing Basket Options by Polynomial Approximations

Author(s):  
Pablo Olivares
2010 ◽  
Vol 30 (3) ◽  
pp. 355-376 ◽  
Author(s):  
Fred Espen Benth ◽  
Pål Nicolai Henriksen

Author(s):  
Pavithra Prabhakar ◽  
Vladimeros Vladimerou ◽  
Mahesh Viswanathan ◽  
Geir E. Dullerud

Mathematics ◽  
2021 ◽  
Vol 9 (13) ◽  
pp. 1498
Author(s):  
Karel J. in’t Hout ◽  
Jacob Snoeijer

We study the principal component analysis based approach introduced by Reisinger and Wittum (2007) and the comonotonic approach considered by Hanbali and Linders (2019) for the approximation of American basket option values via multidimensional partial differential complementarity problems (PDCPs). Both approximation approaches require the solution of just a limited number of low-dimensional PDCPs. It is demonstrated by ample numerical experiments that they define approximations that lie close to each other. Next, an efficient discretisation of the pertinent PDCPs is presented that leads to a favourable convergence behaviour.


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