Year: 2014
Type: preprint
Abstract: In this paper we use Bernstein and Chebyshev polynomials to approximate the price of some basket options under a bivariate Black-Scholes model. The method consists in expanding the price of a univariate related contract after conditioning on the remaining underlying assets and calculating the mixed exponential-power moments of a Gaussian distribution that arise as a consequence of such approximation. Our numerical implementation on spread contracts shows the method is as accurate as a standard Monte Carlo approach at considerable lesser computational effort.
Author: Olivares, Pablo
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1549903746