Generalized Finite Integration Method with space–time decomposition technique for solving high dimensional option pricing models

C. N. Sam; K. X. Zhang; Jeffrey M.H. Hon

doi:10.1016/j.enganabound.2022.10.028

Author(s)

C. N. Sam
K. X. Zhang
Jeffrey M.H. Hon

Related Research Unit(s)

Department of Mathematics

Detail(s)

Original language	English
Pages (from-to)	706-714
Journal / Publication	Engineering Analysis with Boundary Elements
Volume	146
Online published	17 Nov 2022
Publication status	Published - Jan 2023

Link(s)

DOI	DOI https://doi.org/10.1016/j.enganabound.2022.10.028 Final Published version
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Link to Scopus	https://www.scopus.com/record/display.uri?eid=2-s2.0-85142161276&origin=recordpage
Permanent Link	https://scholars.cityu.edu.hk/en/publications/publication(bb01980f-9438-401c-80a0-0556aff89607).html

Abstract

In this paper, the recently developed Generalized Finite Integration Method (GFIM) is further combined with the technique of domain decomposition to solve multiple assets option pricing problems. By taking the time as a temporal variable incorporated with the spatial variables, we apply the space–time decomposition technique to divide the time interval into disjoint union of sub-intervals. The approximate solution at each sub-domain can then be obtained by using the GFIM iteratively. The advantage of this GFIM with space–time decomposition technique will be demonstrated by the numerical examples of solving free-boundary American option and two-assets exchange options pricing problems.