RBF And Optimal Stopping Problems: An Application To The Pricing Of Vanilla Options On One Risky Asset
Price
Free (open access)
Transaction
Volume
23
Pages
10
Published
1999
Size
744 kb
Paper DOI
10.2495/BT990321
Copyright
WIT Press
Author(s)
M.D. Marcozzi, S. Choi, and C.S. Chen
Abstract
The determination of the optimal stopping frontier associated with a given reward function and stochastic process represents an important class of stochastic control problem. In particular, the expectations of such problems may be represented as solutions of variational inequalities of evolutionary type and are typically characterized by their associated high number of degrees of freedom, unbounded domains, and lack of boundary conditions. In this paper, we utilize Radial Basis Functions (RBF) to approximate the solution of a class of optimal stopping problems from financial mathematics; the pricing of vanilla options writte
Keywords