A greedy algorithm for partition of unity collocation method in pricing American options

Fadaei, Yasin and Zareen A., Khan and Akgül, Ali (2019) A greedy algorithm for partition of unity collocation method in pricing American options. Mathematical Methods in the Applied Sciences, 42 (16). ISSN 01704214

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Abstract

A greedy algorithm in combination with radial basis functions partition of unity collocation (GRBF-PUC) scheme is used as a locally meshless method for American option pricing. The radial basis function partition of unity method (RBF-PUM) is a localization technique. Because of having interpolation matrices with large condition numbers, global approximants and some local ones suffer from instability. To overcome this, a greedy algorithm is added to RBF-PUM. The greedy algorithm furnishes a subset of best nodes among the points X. Such nodes are then used as points of trial in a locally supported RBF approximant for each partition. Using of greedy selected points leads to decreasing the condition number of interpolation matrices and reducing the burdensome in pricing American options. keywords: American optiongreedy algorithmmeshless methodpartition of unityradial basis function

Item Type: Article
Subjects: WA Public Health > WA. 900 Vital Statistics
Divisions: Reserach Vice-Chancellar Department > Modeling in Health Research Center
Depositing User: zeynab . bagheri
Date Deposited: 10 May 2020 06:01
Last Modified: 10 May 2020 06:01
URI: http://eprints.skums.ac.ir/id/eprint/8226

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