Option Pricing in Hilbert Space-Valued Jump-Diffusion Models Using Partial Integro-Differential Equations

@article{Hepperger2010OptionPI,
  title={Option Pricing in Hilbert Space-Valued Jump-Diffusion Models Using Partial Integro-Differential Equations},
  author={Peter Hepperger},
  journal={SIAM J. Financial Math.},
  year={2010},
  volume={1},
  pages={454-489}
}
Hilbert space-valued jump-diffusion models are employed for various markets and derivatives. Examples include swaptions, which depend on continuous forward curves, and basket options on stocks. Usually, no analytical pricing formulas are available for such products. Numerical methods, on the other hand, suffer from exponentially increasing computational effort with increasing dimension of the problem, the “curse of dimension.” In this paper, we present an efficient approach using partial… CONTINUE READING

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