Recent Articles

Matlab GPU toolbox: Benchmarking Accelereyes vs. MathWorks vs. GP-YOU?

Graphics Card

There is a great option for speed-up of your Matlab code: Use your graphics card. If you have an Nvidia graphics card, there is a whole universe of optimized code for these cards. The underlying technology is called CUDA and many of the required functions for a transparent usage from Matlab already exist. There are […]

Feedback: What is the Effect of Hedging Options on the Underlying?

Plot from Theta Suite Result Explorer

More and more investors insist on guarantees on the investments. Theses investments are often created using options or dynamic strategies like CPPI. Recently, these strategies were made available in secularized form: Leveraged Exchange Traded Funds   (LETF) and Exchange Traded Notes (ETN). Also, life insurance instruments often include guarantees on funds like Variable Annuities. In this […]

This seems to be an interesting topic…

The Easiest Back-Testing of Trading Strategies: MS Excel Pivot Table!

MS Excel Pivot Table in Backtesting of a Trading Strategy

Before using specialized tools for back-testing I propose that one tries the MS Excel Pivot Table first. The pivot table tool is great for inspection, filtering and analyzing large data sets. In this article, I will present how to create a simple timing-based strategy and how to compute its historical performance.

Sell in May and Go Away But Remember to Come Back in September. Really?

Sell in May and go away is an old wisdom which is interesting to analyze. And the continuation “Remember to come back in September” completes this wisdom to a real trading strategy. This strategy is quite old. Many sources say that the original saying comes from traders in the City of London and was “Sell in May […]

Comprehensive List of Free Historical Market Data Sources

Often people ask me where they can find historical data of stock prices, commodities, interest-rates, bonds, fx rates … . In previous posts, we already looked at live data feeds for Matlab, and Excel. Then, we looked at how to load historical data.  Now, we want to focus on where to get the data itself.

How Do Efficient PDE Solvers for Barrier Options Look Like?

Besides European and American Options, another challenge in option pricing is the valuation of Barrier Options. We will see that simply applying the algorithms from the previous posts does not converge well. Especially, pricing a long-term up-and-out barrier option is hard, due to the discontinuity of the payoff. 

How Can I Implement Early Exercise in a PDE Method pricing an American Put Option?

An American option is an option which the owner can exercise at any time during its lifetime. That means the option’s value cannot drop below the exercise value, i.e. the option value  of an American put option satisfies . (1) We use the above condition in the PDE solver (How Can I Price an Option with a PDE Method in Matlab?) to price an American […]

How Can I Price an Option with a PDE Method in Matlab?

Values of European Put Option computed using a PDE solver

In this article, we build a very simple PDE solver for the Black-Scholes Equation. Using the Finite Volume Discretization Method, we derive the equations required for an efficient implementation in Matlab. The implicit Euler time-stepping of the solver guarantees a stable behavior and convergence. All posts in this series: Basics of a PDE solver in Matlab Pricing American options with […]