2014/04/11 by Pablo Olivares, Olivares, Pablo
Economics, Econometrics and Finance · #41A10 #91B70 #Capital Investment and Risk Analysis #FOS: Economics and business #Financial Risk and Volatility Modeling #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.1404.3160
openalex publication_date 2014/04/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this paper we use Bernstein and Chebyshev polynomials to approximate the price of some basket options under a bivariate Black-Scholes model. The method consists in expanding the price of a univariate related contract after conditioning on the remaining underlying assets and calculating the mixed exponential-power moments of a Gaussian distribution that arise as a consequence of such approximation. Our numerical implementation on spread contracts shows the method is as accurate as a standard Monte Carlo approach at considerable lesser computational effort.