Numerical valuation of Bermudan basket options via partial differential equations

Jacob Snoeijer (University of Antwerp), Karel in ’t Hout

This talk deals with numerical methods to approximate the fair values of European and Bermudan basket options, which constitute common products in the financial markets. If there are \(d\ge 2\) assets in the basket, then the fair value of such a financial option satisfies a time-dependent \(d\)-dimensional partial differential equation. For its efficient numerical solution, we discuss in this talk a useful dimension reduction technique and numerically investigate its convergence behaviour by ample experiments.