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A Numerical Study of Radial Basis Function Based Methods for Options Pricing under the One Dimension Jump-diffusion Model
[article]
2011
arXiv
pre-print
The aim of this chapter is to show how option prices in jump-diffusion models can be computed using meshless methods based on Radial Basis Function (RBF) interpolation. The RBF technique is demonstrated by solving the partial integro-differential equation (PIDE) in one-dimension for the American put and the European vanilla call/put options on dividend-paying stocks in the Merton and Kou jump-diffusion models. The radial basis function we select is the Cubic Spline. We also propose a simple
arXiv:1011.5650v4
fatcat:vk2zevmcgvek3pauyrmngt3l3i