Timeline and Wavelets Method for Pricing Cash-or-Nothing Options

Document Type : Original Scientific Paper

Authors

1 ‎Department of Mathematics,‎ ‎Khansar Campus‎, ‎University of Isfahan, ‎Isfahan‎, ‎I‎. ‎R‎. ‎Iran

2 ‎Department of Mathematics and Statistics,‎ University of Vaasa, ‎P.O‎. ‎Box 700‎, ‎Fin-65101 Vaasa‎, ‎Finland

Abstract

This study investigates the application of the Haar wavelet method as an innovative and effective approach for valuing financial derivatives‎, ‎particularly cash-or-nothing options‎. ‎Valuing derivatives is a complex task in finance‎, ‎requiring advanced numerical methods that can adapt to various models and scenarios‎. ‎Cash-or-nothing options are popular for their simplicity and cost-effectiveness in market speculation and risk hedging‎, ‎but their pricing is challenging due to several influencing factors‎. ‎The study provides a comprehensive overview of the Haar wavelet method‎, ‎demonstrating through numerical examples its precision and stability in option pricing‎. ‎Additionally‎, ‎it examines critical risk parameters‎, ‎such as delta and gamma‎, ‎essential for managing and hedging risks associated with these options.

Keywords

Main Subjects

References

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Mathematics Interdisciplinary Research
Volume 9, Issue 3
September 2024
Pages 315-331

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