Comparison of radial basis functions in evaluating the Asian option

Abstract

Some researchers have presented the application of radial basis function approximation to the evaluation of option contracts.In a previous study, the authors described the evaluation of Asian options by using radial basis function approximation. The numerical results indicated that the computational accuracy depended on the radial basis function and the reciprocal multi-quadric function was better than the multi-quadric one.So, in this study, some radial basis functions are applied to the evaluation of the Asian option of one asset. We compare the multi-quadric, the reciprocal multiquadric, and Gaussian functions. The results show that the reciprocal multiquadric function and Gaussian function give better numerical results and the reciprocal multi-quadric function is better than the others.