WIT Press


RBF And Optimal Stopping Problems: An Application To The Pricing Of Vanilla Options On One Risky Asset

Price

Free (open access)

Paper DOI

10.2495/BT990321

Volume

23

Pages

10

Published

1999

Size

744 kb

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