Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26353 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2308
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper suggests a simple method based on a Chebyshev approximation at Chebyshev nodes to approximate partial differential equations. It consists in determining the value function by using a set of nodes and basis functions. We provide two examples: pricing a European option and determining the best policy for shutting down a machine. The suggested method is flexible, easy to programme and efficient. It is also applicable in other fields, providing efficient solutions to complex systems of partial differential equations.
Subjects: 
European options
Chebyshev polynomial approximation
Chebyshev nodes
JEL: 
C63
G12
Document Type: 
Working Paper
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