Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26353
Authors: 
Caporale, Guglielmo Maria
Cerrato, Mario
Year of Publication: 
2008
Series/Report no.: 
CESifo working paper 2308
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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