Finance
The famous Black-Scholes equation is an effective model for option pricing. It was named after the pioneers Black, Scholes and Merton who suggested it 1973.
In this research field our aim is the development of effective numerical schemes for solving linear and nonlinear problems arising in the mathematical theory of derivative pricing models.
An option is the right (not the duty) to buy (`call option') or to sell (`put option') an asset (typically a stock or a parcel of shares of a company) for a price E by the expiry date T. European options can only be exercised at the expiration date T. For American options exercise is permitted at any time until the expiry date. The standard approach for the scalar Black-Scholes equation for European (American) options results after a standard transformation in a diffusion equation posed on an bounded (unbounded) domain.
Another problem arises when considering American options (most of the options on stocks are American style). Then one has to compute numerically the solution on a semi-unbounded domain with a free boundary. Usually finite differences or finite elements are used to discretize the equation and artificial boundary conditions are introduced in order to confine the computational domain.
In this research field we want to design and analyze new efficient and robust numerical methods for the solution of highly nonlinear option pricing problems. Doing so, we have to solve adequately the problem of unbounded spatial domains by introducing artificial boundary conditions and show how to incorporate them in a high-order time splitting method.
Nonlinear Black-Scholes equations have been increasingly attracting interest over the last two decades, since they provide more accurate values than the classical linear model by taking into account more realistic assumptions, such as transaction costs, risks from an unprotected portfolio, large investor's preferences or illiquid markets, which may have an impact on the stock price, the volatility, the drift and the option price itself.
Special Interests
Publications
- 2024
4880.
Levron, Yoash; Valadez, Alan; Weiss, George
Testing the Local Stability of a Multi-Machine Power System with Constant Power Loads
20244879.
Ehrhardt, Matthias; Kruse, Thomas; Tordeux, Antoine
The collective dynamics of a stochastic port-Hamiltonian self-driven agent model in one dimension
ESAIM: Mathematical Modelling and Numerical Analysis, 58 (2) :515–544
2024
Herausgeber: EDP Sciences4878.
Rohde, Martin; Burgmann, Sebastian; Janoske, Uwe
The impact of a two-dimensional vibration excitation on the critical incident flow velocity of a sessile droplet
International Journal of Multiphase Flow, 171 :104663
2024
Herausgeber: Pergamon4877.
Reiter, Kendra; Schmidt, Marie; Stiglmayr, Michael
The Line-Based Dial-a-Ride Problem
In Bouman, Paul C. and Kontogiannis, Spyros C., Editor, 24th Symposium on Algorithmic Approaches for Transportation Modelling, Optimization, and Systems (ATMOS 2024)Band123ausOpen Access Series in Informatics (OASIcs), Seite 14:1—14:20
24th Symposium on Algorithmic Approaches for Transportation Modelling, Optimization, and Systems (ATMOS 2024). Open Access Series in Informatics (OASIcs)
In Bouman, Paul C. and Kontogiannis, Spyros C., Editor
Herausgeber: Schloss Dagstuhl — Leibniz-Zentrum für Informatik, Dagstuhl, Germany
20244876.
Ehrhardt, Matthias; Zheng, Chunxiong
für Angewandte Analysis und Stochastik- 2024
4875.
[german] Zeller, Diana; Bohrmann-Linde, Claudia; Mack, Nils; Diekmann, Charlotte; Schrader, Claudia
Virtual Reality für den Chemieunterricht
Nachrichten aus der Chemie, 72 (6) :15-22
20244874.
Kapllani, Lorenc; Teng, Long; Rottmann, Matthias
Uncertainty quantification for deep learning-based schemes for solving high-dimensional backward stochastic differential equations
To appear in International Journal of Uncertainty Quantification
2024
Herausgeber: Begell4873.
Hendricks, Christian; Ehrhardt, Matthias; Günther, Michael
Hybrid finite difference/pseudospectral methods for stochastic volatility models
19th European Conference on Mathematics for Industry, Seite 3884872.
Ehrhardt, Matthias; Zheng, Chunxiong
für Angewandte Analysis und Stochastik4871.
Ehrhardt, Matthias
Positive Schemes for Air Pollution Problems, Optimal Location of Industrial Enterprises and Optimization of their Emissions4870.
Günther, Michael; Wandelt, Dipl Math Mich{\`e}le
Numerical Analysis and Simulation I: ODEs4869.
Ehrhardt, Matthias; Günther, Michael
Numerical Evaluation of Complex Logarithms in the Cox-Ingersoll-Ross Model4868.
Ehrhardt, Matthias; Günther, Michael
Numerical Pricing of Game (Israeli) Options4867.
Ehrhardt, Matthias; Günther, Michael
Numerical Pricing of Game (Israeli) Options4866.
Ehrhardt, Matthias; Farkas, Bálint; Günther, Michael; Jacob, Birgit; Bartel, PD Dr Andreas
Operator Splitting and Multirate Schemes4865.
Ehrhardt, Matthias; Farkas, B{\'a}lint; Günther, Michael; Jacob, Birgit; Bartel, PD Dr Andreas
Operator Splitting and Multirate Schemes4864.
Calvo-Garrido, MC; Ehrhardt, M; V{\'a}zquez, C
PDE modeling and numerical methods for swing option pricing in electricity markets
19th European Conference on Mathematics for Industry, Seite 3904863.
Calvo-Garrido, MC; Ehrhardt, M; Vázquez, C
PDE modeling and numerical methods for swing option pricing in electricity markets
19th European Conference on Mathematics for Industry, Seite 3904862.
Acu, A.M.; Heilmann, Margareta; Raşa, I.
Voronovskaja type results for the Aldaz-Kounchev-Render versions of generalized Baskakov Operators
submitted4861.
Maten, E Jan W; Ehrhardt, Matthias
MS40: Computational methods for finance and energy markets
19th European Conference on Mathematics for Industry, Seite 3774860.
Ehrhardt, Matthias
Positive Schemes for Air Pollution Problems, Optimal Location of Industrial Enterprises and Optimization of their Emissions4859.
Carmen Calvo-Garrido, Mar{\i}a; Ehrhardt, Matthias; V{\'a}zquez, Carlos
Pricing swing options in electricity markets with two stochastic factors: PIDE modeling and numerical solution
3rd International Conference on Computational Finance (ICCF2019), Seite 894858.
Carmen Calvo-Garrido, Mar{\i}a; Ehrhardt, Matthias; Vázquez, Carlos
Pricing swing options in electricity markets with two stochastic factors: PIDE modeling and numerical solution
3rd International Conference on Computational Finance (ICCF2019), Seite 894857.
Putek, PA; Ter Maten, EJW; Günther, M
Reliability-based Low Torque Ripple Design of Permanent Magnet Machine4856.
Günther, M; Ehrhardt, M; Knechtli, F; Shcherbakov, D; Striebel, M; Wandelt, M
Symmetric \& Volume Preserving Projection Schemes