Radial basis function methods to solve partial differential equations arising in financial applications-A review

  • Geeta Arora
  • Gurpreet Singh Bhatia

Abstract

Radial basis function (RBF) methods are used widely to solve partial differential equations (PDE). RBF methods have been applied to various diverse fields due to their mesh free characteristics, easy to implement nature and dimensional independence. These methods have been actively developed over the years from global to local approximation and then to hybrid approach. In this paper, various RBF methods are discussed for the solution of option pricing problems arising in finance. Since the price of option can be evaluated as the solution of Black-Scholes equation hence this paper presents review of the RBF methods for various price option problems such as American option, European option and Asian option.

 

Published
2017-02-27