Multigrid for American option pricing with stochastic volatility

The paper describes an implicit finite difference approach to the pricing of American options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of this approach is improved considerably by a strike-price related analytic transformation of asset prices and adaptive time-stepping.

A distributed algorithm for European options with nonlinear volatility

A distributed algorithm is developed to solve nonlinear Black-Scholes equations in the hedging of portfolios. The algorithm is based on an approximate inverse Laplace transform and is particularly suitable for problems that do not require detailed knowledge of each intermediate time steps.

Exploring the conditional performance of UK unit trusts

We evaluate the conditional performance of U.K. equity unit trusts using the approach of Lynch and Wachter (2007, 2008) relative to three conditional linear factor models. We find significant time variation in the conditional performance of some trust portfolios and individual trusts using the lag term spread as the information variable. The conditional performance of the trusts is countercyclical and larger trusts have more countercyclical performance than smaller trusts within certain investment sectors. These patterns in conditional trust performance cannot be fully explained by the underlying securities that the trusts hold.