SC²S Colloquium - June 29, 2011

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Date: June 29, 2011
Room: 02.07.023
Time: 15:00 pm, s.t.


Peter Hepperger: Pricing High-Dimensional Options with Dimension-Reduced PDEs

We consider financial contracts (options) depending on a large number of underlying assets. Computing fair prices for such derivatives leads to high-dimensional partial differential equations (PDEs). The "curse of dimensionality" makes solving these PDEs a numerically challenging task, even on sparse grids. Dimension reduction methods yield computationally tractable, low-dimensional approximations. The dimension-reduced PDEs can also be combined with Monte Carlo simulation to obtain a fast-converging algorithm.