Using Chebyshev Polynomials to Approximate Partial Differential Equations: A Reply
Caporale and Cerrato (Comput Econ 35(3):235–244, 2010) propose a simple method based on Chebyshev approximation and Chebyshev nodes to approximate partial differential equations (PDEs). However, they suggest not to use Chebyshev nodes when dealing with optimal stopping problems. Here, we use the same optimal stopping example to show that Chebyshev polynomials and Chebyshev nodes can still be successfully used together if we solve the model in a matrix environment.
KeywordsChebyshev polynomial approximation Chebyshev nodes Optimal stopping problem
JEL ClassificationC63 D81
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