The conditional expectation of the value of a contract payoff function under the risk neutral measure can be linked to the solution of a partial (integro-) differential equation (PIDE) (0ksendal, 2007). This PIDE can then be solved using discretization schemes, such as Finite Differences (FD) and Finite Elements (FEM), or by Wavelet-based methods, together with appropriate boundary and terminal conditions. A direct discretization of the underlying stochastic differential equation, on the other hand, leads to (Quasi)Monte Carlo (QMC) methods. Both groups of numerical techniques – discretization of the P(I)DE as well as discretization of the SDE – are discussed elsewhere in the book. A third group of methods, which will be discussed in this chapter, directly applies numerical integration techniques to the risk neutral valuation formula for European options (Cox and Ross, 1976)

where *V* denotes the option value, Δ*t* is the difference between the maturity *T* and the valuation date *t*_{0}*, f*(*y* | *x*) is the probability density of *y =* ln(*S _{T}*/

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