Timeline and Wavelets Method for Pricing Cash-or-Nothing Options

Abstract

This study investigates the application of the Haar wavelet method as an innovative and effective approach for valuing financial derivatives‎, ‎particularly cash-or-nothing options‎. ‎Valuing derivatives is a complex task in finance‎, ‎requiring advanced numerical methods that can adapt to various models and scenarios‎. ‎Cash-or-nothing options are popular for their simplicity and cost-effectiveness in market speculation and risk hedging‎, ‎but their pricing is challenging due to several influencing factors‎. ‎The study provides a comprehensive overview of the Haar wavelet method‎, ‎demonstrating through numerical examples its precision and stability in option pricing‎. ‎Additionally‎, ‎it examines critical risk parameters‎, ‎such as delta and gamma‎, ‎essential for managing and hedging risks associated with these options.