In this work, we analyse the Galerkin Infinite Element method for option pricing. The Infinite Element method is a very simple and efficient modication of the more common Finite Element method. It keeps the best features of Finite Elements, i.e. bandedness, easiness of programming, accuracy, and it is particularly useful when solving problems in unbounded domains. Three main aspects are considered: (i) the degeneracy of the pricing PDE models at hand; (ii) the presence of discontinuities at the barriers or in the payoff clause and their effects on the numerical approximation process; (iii) the need for resorting to suitable numerical methods for unbounded domains when appropriate asymptotic conditions are not specified.

A Numerical Method for Handling Asymptotic Boundary Conditions in Finance / Sanfelici, Simona. - (2003), pp. 257-274.

A Numerical Method for Handling Asymptotic Boundary Conditions in Finance

SANFELICI, Simona
2003-01-01

Abstract

In this work, we analyse the Galerkin Infinite Element method for option pricing. The Infinite Element method is a very simple and efficient modication of the more common Finite Element method. It keeps the best features of Finite Elements, i.e. bandedness, easiness of programming, accuracy, and it is particularly useful when solving problems in unbounded domains. Three main aspects are considered: (i) the degeneracy of the pricing PDE models at hand; (ii) the presence of discontinuities at the barriers or in the payoff clause and their effects on the numerical approximation process; (iii) the need for resorting to suitable numerical methods for unbounded domains when appropriate asymptotic conditions are not specified.
8888037063
A Numerical Method for Handling Asymptotic Boundary Conditions in Finance / Sanfelici, Simona. - (2003), pp. 257-274.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11381/2437455
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