Wavelet analytical method on the Heston option pricing model

Document Type : Research Paper

Authors

1 Department of Applied Mathematics, Islamic Azad University, Bandar Anzali Branch, Anzali, Iran

2 Department of Applied Mathematics, Faculty of Mathematical Sciences, University of Guilan 41335-1914,Rasht, Guilan, Iran

Abstract

In this paper, the Heston partial differential equation option pricing model is considered and the Legendre wavelet method (LWM) is used to solve this equation. The attributes of Legendre wavelets are used to reduce the PDEs problem into the solution of the ODEs system. The wavelet base is used in approximation due to its simplicity and efficiency. The method of creating Legendre wavelets and their main properties were briefly mentioned. Some numerical schemes have been compared with the LWM in the result.

Keywords

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Volume 13, Issue 2
July 2022
Pages 151-158
  • Receive Date: 04 August 2021
  • Accept Date: 25 January 2022