Algorithms for Nonlinear Models in Computational
Finance and their Object-oriented Implementation
10:30 a.m., Thursday, June 10, 1999
rm 102, Warren Weaver Hall
Individual components of financial option portfolios cannot be evaluated independently under nonlinear models in mathematical finance. This entails increased algorithmic complexity if the options under consideration are path-dependent. We describe algorithms that price portfolios of vanilla, barrier and American options under worst-case assumptions in an uncertain volatility setting. We present a generalized approach to worst-case volatility scenarios in which only the duration, but not the starting dates of periods of high volatility risk are known. Our implementation follows object-oriented principles and is modular and extensible. Combinatorial and numerical algorithms are separate and orthogonal to each other. We make our tools available to a wide audience by using standard Internet technologies.