Seminar series
Date
Thu, 28 Oct 2004
Time
14:00 -
15:00
Location
Comlab
Speaker
Prof Christoph Reisinger
Organisation
University of Heidelberg / OCIAM
Sparse grids yield numerical solutions to PDEs with a
significantly reduced number of degrees of freedom. The relative
benefit increases with the dimensionality of the problem, which makes
multi-factor models for financial derivatives computationally tractable.
An outline of a convergence proof for the so called combination
technique will be given for a finite difference discretisation of the
heat equation, for which sharp error bounds can be shown.
Numerical examples demonstrate that by an adaptive (heuristic)
choice of the subspaces European and American options with up to thirty
(and most likely many more) independent variables can be priced with
high accuracy.