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A greedy algorithm for partition of unity collocation method in pricing American options.
- Source :
-
Mathematical Methods in the Applied Sciences . Nov2019, Vol. 42 Issue 16, p5595-5606. 12p. - Publication Year :
- 2019
-
Abstract
- A greedy algorithm in combination with radial basis functions partition of unity collocation (GRBF‐PUC) scheme is used as a locally meshless method for American option pricing. The radial basis function partition of unity method (RBF‐PUM) is a localization technique. Because of having interpolation matrices with large condition numbers, global approximants and some local ones suffer from instability. To overcome this, a greedy algorithm is added to RBF‐PUM. The greedy algorithm furnishes a subset of best nodes among the points X. Such nodes are then used as points of trial in a locally supported RBF approximant for each partition. Using of greedy selected points leads to decreasing the condition number of interpolation matrices and reducing the burdensome in pricing American options. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 01704214
- Volume :
- 42
- Issue :
- 16
- Database :
- Academic Search Index
- Journal :
- Mathematical Methods in the Applied Sciences
- Publication Type :
- Academic Journal
- Accession number :
- 139349440
- Full Text :
- https://doi.org/10.1002/mma.5757