A highly efficient pricing method for European-style options based on Shannon wavelets

In the search for robust, accurate and highly efficient financial option valuation techniques, we present here the SWIFT method (Shannon Wavelets Inverse Fourier Technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative error bounds. The nature of the local Shannon wavelets basis enables us to adaptively determine the proper size of the computational interval. Numerical experiments on European-style options confirm the bounds, robustness and efficiency

Shannon wavelets theory.

Shannon wavelets are studied together with their differential properties (known as connection coefficients). It is shown that the Shannon sampling theorem can be considered in a more general approach suitable for analyzing functions ranging in multifrequency bands. This generalization coincides with the Shannon wavelet reconstruction ofL2(ℝ)functions. The differential properties of Shannon wavelets are also studied through the connection coefficients. It is shown that Shannon wavelets areC∞-functions and their any order derivatives can be analytically defined by some kind of a finite hypergeometric series. These coefficients make it possible to define the wavelet reconstruction of the derivatives of theCℓ-functions

Shannon Wavelets for the Solution of Integrodifferential Equations

Shannon wavelets are used to define a method for the solution of integrodifferential equations. This method is based on (1) the Galerking method, (2) the Shannon wavelet representation, (3) the decorrelation of the generalized Shannon sampling theorem, and (4) the definition of connection coefficients. The Shannon sampling theorem is considered in a more general approach suitable for analysing functions ranging in multifrequency bands. This generalization coincides with the Shannon wavelet reconstruction ofL2(ℝ)functions. Shannon wavelets areC∞-functions and their any order derivatives can be analytically defined by some kind of a finite hypergeometric series (connection coefficients)

Signorini Cylindrical Waves and Shannon Wavelets

Hyperelastic materials based on Signorini's strain energy density are studied by using Shannon wavelets. Cylindrical waves propagating in a nonlinear elastic material from the circular cylindrical cavity along the radius are analyzed in the following by focusing both on the main nonlinear effects and on the method of solution for the corresponding nonlinear differential equation. Cylindrical waves' solution of the resulting equations can be easily represented in terms of this family of wavelets. It will be shown that Hankel functions can be linked with Shannon wavelets, so that wavelets can have some physical meaning being a good approximation of cylindrical waves. The nonlinearity is introduced by Signorini elastic energy density and corresponds to the quadratic nonlinearity relative to displacements. The configuration state of elastic medium is defined through cylindrical coordinates but the deformation is considered as functionally depending only on the radial coordinate. The physical and geometrical nonlinearities arising from the wave propagation are discussed from the point of view of wavelet analysis

Orthogonality Conditions for Non-Dyadic Wavelet Analysis

The conventional dyadic multiresolution analysis constructs a succession of frequency intervals in the form of ( π  / 2  j , π  / 2  j  - 1 ); j  = 1, 2, . . . ,  n of which the bandwidths are halved repeatedly in the descent from high frequencies to low frequencies. Whereas this scheme provides an excellent framework for encoding and transmitting signals with a high degree of data compression, it is less appropriate to the purposes of statistical data analysis.       A non-dyadic mixed-radix wavelet analysis is described that allows the wave bands to be defined more flexibly than in the case of a conventional dyadic analysis. The wavelets that form the basis vectors for the wave bands are derived from the Fourier transforms of a variety of functions that specify the frequency responses of the filters corresponding to the sequences of wavelet coefficients.Wavelets, Non-dyadic analysis, Fourier analysis

Shannon wavelets inverse Fourier technique for computacional finance

Treballs finals del Màster en Matemàtica Avançada, Facultat de matemàtiques, Universitat de Barcelona, Any: 2018, Director: Luis Ortiz Gracia i Josep Vives i Santa Eulàlia[en] European options are financial derivatives, governed by the solution of an integral, the so-called discounted expectation of the pay-off function. For the computation of the expectation we require knowledge about the probability density function of the stochastic asset price process, which is typically available by its Fourier transform. In this project, we will explore wavelets theory to be able to construct the Shannon wavelets and use them to describe the density function. Also, a numerical method proposed by Luis Ortiz-Gracia and Cornelis W. Oosterlee to price these derivatives will be presented. This is called SWIFT (Shannon wavelet inverse Fourier technique)