RT Journal Article
T1 Valuation of boundary-linked assets by stochastic boundary value problems solved with a wavelet-collocation algorithm
A1 Esteban-Bravo, Mercedes
A1 Vidal-Sanz, Jose M.
AB This article studies the valuation of boundary-linked assets and their derivatives in continuous-time markets. Valuing boundary-linked assets requires the solution of a stochastic differential equation with boundary conditions, which, often, is not Markovian. We propose a waveletcollocation algorithm for solving a Milstein approximation to the stochastic boundary problem. Its convergence properties are studied. Furthermore, we value boundary-linked derivatives using Malliavin calculus and Monte Carlo methods. We apply these ideas to value European call options ofboundary-linked assets.
PB Elsevier
SN 0898-1221
YR 2006
FD 2006-07
LK https://hdl.handle.net/10016/7312
UL https://hdl.handle.net/10016/7312
LA eng
DS e-Archivo
RD 8 may. 2024