Computable error bounds of multidimensional Euler inversion and their financial applications

Zeng，Pingping1; Shi，Chao2

2022-11-01

10.1016/j.orl.2022.10.013

OPERATIONS RESEARCH LETTERS   Impact Factor & Quartile

0167-6377

1872-7468

Transform inversion is an efficient approximation procedure in operations research, yet the inversion results are sometimes unstable which calls for comprehensive error analysis. This article proposes a multidimensional Euler inversion (MEI) algorithm with computable error bounds. We design mild sufficient conditions that validate the inversion formula, and provide closed-form upper bounds of the inversion errors. Numerical experiments are conducted to compute the joint probability of default and barrier option prices under complicated stochastic models, and output the associated error bounds.

Barrier option Discretization error Joint probability of default Multidimensional Euler inversion Truncation error

SCI

English

First

National Natural Science Foundation of China[11701266];National Natural Science Foundation of China[12171228];National Key Research and Development Program of China[2022YFA1000009];National Natural Science Foundation of China[71501043];National Natural Science Foundation of China[71971132];

Operations Research & Management Science

Operations Research & Management Science

WOS:000890340400002

ELSEVIER

ENGINEERING

2-s2.0-85141487739

Scopus

1.Department of Mathematics,Southern University of Science and Technology,Shenzhen,China
2.School of Information Management and Engineering,Shanghai University of Finance and Economics,Shanghai,China

Zeng，Pingping,Shi，Chao. Computable error bounds of multidimensional Euler inversion and their financial applications[J]. OPERATIONS RESEARCH LETTERS,2022,50(6):726-731.

Zeng，Pingping,&Shi，Chao.(2022).Computable error bounds of multidimensional Euler inversion and their financial applications.OPERATIONS RESEARCH LETTERS,50(6),726-731.

Zeng，Pingping,et al."Computable error bounds of multidimensional Euler inversion and their financial applications".OPERATIONS RESEARCH LETTERS 50.6(2022):726-731.