Computational database technology applied to option pricing via finite differences

  • Authors:

  • Jöns Åkerlund;Krister Åhlander;Kjell Orsborn

  • Affiliations:

  • Department of Information Technology, Uppsala University, Uppsala, Sweden;Department of Information Technology, Uppsala University, Uppsala, Sweden;Department of Information Technology, Uppsala University, Uppsala, Sweden

  • Venue:
  • ADBIS'06 Proceedings of the 10th East European conference on Advances in Databases and Information Systems
  • Year:
  • 2006

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Abstract

Computational database technology spans the two research fields data-base technology and scientific computing. It involves development of database capabilities that support computational-intensive applications found in science and engineering. This includes support for representing and processing of mathematical models within the database environment without any significant performance loss compared to conventional implementations. This paper describes how an existing database management system, AMOS II, is extended with capabilities to solve the Black–Scholes equation commonly used in option pricing. The numerical method used is finite differences, and a flexible database framework that can deal with complex mathematical objects and numerical methods is created. We describe how computational data representations and operations are adapted to the database management system and the approach is evaluated with respect to performance, extensibility, and ease of use.