{
  "id": "1909.01164",
  "version": "v1",
  "published": "2019-09-03T13:27:35.000Z",
  "updated": "2019-09-03T13:27:35.000Z",
  "title": "Numerical valuation of Bermudan basket options via partial differential equations",
  "authors": [
    "Karel J. in 't Hout",
    "Jacob Snoeijer"
  ],
  "categories": [
    "math.NA",
    "cs.NA"
  ],
  "abstract": "We study the principal component analysis (PCA) based approach introduced by Reisinger & Wittum (2007) for the approximation of Bermudan basket option values via partial differential equations (PDEs). This highly efficient approximation approach requires the solution of only a limited number of low-dimensional PDEs complemented with optimal exercise conditions. It is demonstrated by ample numerical experiments that a common discretization of the pertinent PDE problems yields a second-order convergence behaviour in space and time, which is as desired. It is also found that this behaviour can be somewhat irregular, and insight into this phenomenon is obtained.",
  "revisions": [
    {
      "version": "v1",
      "updated": "2019-09-03T13:27:35.000Z"
    }
  ],
  "analyses": {
    "keywords": [
      "partial differential equations",
      "numerical valuation",
      "pertinent pde problems yields",
      "bermudan basket option values",
      "highly efficient approximation approach"
    ],
    "note": {
      "typesetting": "TeX",
      "pages": 0,
      "language": "en",
      "license": "arXiv",
      "status": "editable"
    }
  }
}