Improved Additive Operator Splitting Algorithms for Basket Option Pricing Model

DOI

10.2991/iccia.2012.104How to use a DOI?

Keywords

basket option pricing model, Additive Operator Splitting (AOS), difference schem, stability, numerical experiment.

Abstract

In order to solve Black-Scholes equation of basket option pricing model by numerical method. This paper used Additive Operator Splitting (AOS) algorithm to split the multi-dimensional Black-Scholes equation into equivalent one-dimensional equation set, and constructed 'Explicit-Implicit' and 'Implicit-Explicit' schemes to solve it. Then compatibility, stability and convergence of those schemes were analyzed. Finally, this paper compared computation time and precision of the schemes through numerical experiments. 'Explicit-Implicit' and 'Implicit-Explicit' schemes of AOS algorithms have both higher accuracy and faster computing speed and them have practical significance in solving basket option pricing model.

Copyright

© 2013, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Xiaozhong Yang
AU  - Gaoxin Zhou
PY  - 2014/05
DA  - 2014/05
TI  - Improved Additive Operator Splitting Algorithms for Basket Option Pricing Model
BT  - Proceedings of the 2012 2nd International Conference on Computer and Information Application (ICCIA 2012)
PB  - Atlantis Press
SP  - 433
EP  - 436
SN  - 1951-6851
UR  - https://doi.org/10.2991/iccia.2012.104
DO  - 10.2991/iccia.2012.104
ID  - Yang2014/05
ER  -