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Volume 27, Issue 3
Wavelet Collocation Methods for Viscosity Solutions to Swing Options in Natural Gas Storage

Hua Li, Antony Ware & Li Guo

DOI: 10.4208/jpde.v27.n3.4

J. Part. Diff. Eq., 27 (2014), pp. 229-244.

Published online: 2014-09

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  • Abstract
This paper presents the wavelet collocation methods for the numerical approximation of swing options for natural gas storage in a mean reverting market. The model is characterized by the Hamilton-Jacobi-Bellman (HJB) equations which only have the viscosity solution due to the irregularity of the swing option. The differential operator is formulated exactly and efficiently in the second generation interpolating wavelet setting. The convergence and stability of the numerical scheme are studied in the framework of viscosity solution theory. Numerical experiments demonstrate the accuracy and computational efficiency of the methods.
  • Keywords

Swing option viscosity solution wavelet collocation

  • AMS Subject Headings

65C20, 62P05, 97M30

  • Copyright

COPYRIGHT: © Global Science Press

  • Email address

huali08@zzu.edu.cn (Hua Li)

aware@ucalgary.ca (Antony Ware)

1053500513@qq.com (Li Guo)

  • BibTex
  • RIS
  • TXT
@Article{JPDE-27-229, author = {Li , HuaWare , Antony and Guo , Li}, title = {Wavelet Collocation Methods for Viscosity Solutions to Swing Options in Natural Gas Storage}, journal = {Journal of Partial Differential Equations}, year = {2014}, volume = {27}, number = {3}, pages = {229--244}, abstract = { This paper presents the wavelet collocation methods for the numerical approximation of swing options for natural gas storage in a mean reverting market. The model is characterized by the Hamilton-Jacobi-Bellman (HJB) equations which only have the viscosity solution due to the irregularity of the swing option. The differential operator is formulated exactly and efficiently in the second generation interpolating wavelet setting. The convergence and stability of the numerical scheme are studied in the framework of viscosity solution theory. Numerical experiments demonstrate the accuracy and computational efficiency of the methods.}, issn = {2079-732X}, doi = {https://doi.org/10.4208/jpde.v27.n3.4}, url = {http://global-sci.org/intro/article_detail/jpde/5139.html} }
TY - JOUR T1 - Wavelet Collocation Methods for Viscosity Solutions to Swing Options in Natural Gas Storage AU - Li , Hua AU - Ware , Antony AU - Guo , Li JO - Journal of Partial Differential Equations VL - 3 SP - 229 EP - 244 PY - 2014 DA - 2014/09 SN - 27 DO - http://doi.org/10.4208/jpde.v27.n3.4 UR - https://global-sci.org/intro/article_detail/jpde/5139.html KW - Swing option KW - viscosity solution KW - wavelet KW - collocation AB - This paper presents the wavelet collocation methods for the numerical approximation of swing options for natural gas storage in a mean reverting market. The model is characterized by the Hamilton-Jacobi-Bellman (HJB) equations which only have the viscosity solution due to the irregularity of the swing option. The differential operator is formulated exactly and efficiently in the second generation interpolating wavelet setting. The convergence and stability of the numerical scheme are studied in the framework of viscosity solution theory. Numerical experiments demonstrate the accuracy and computational efficiency of the methods.
Li , HuaWare , Antony and Guo , Li. (2014). Wavelet Collocation Methods for Viscosity Solutions to Swing Options in Natural Gas Storage. Journal of Partial Differential Equations. 27 (3). 229-244. doi:10.4208/jpde.v27.n3.4
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