Meshfree Methods in Option Pricing Meshfree Methods in Option Pricing

A meshfree approximation scheme based on the radial basis function methods is presented for the numerical solution of the options pricing model. This thesis deals with the valuation of the European, Barrier, Asian, American options of a single asset and American options of multi assets. The option prices are modeled by the Black-Scholes equation. The θ-method is used to discretize the equation with respect to time. By the next step, the option price is approximated in space with radial basis functions (RBF) with unknown parameters, in particular, we consider multiquadric radial basis functions (MQ-RBF). In case of American options a penalty method is used, i.e. removing the free boundary is achieved by adding a small and continuous penalty term to the BlackScholes equation. Finally, a comparison of analytical and finite difference solutions and numerical results from the literature is included.