Reconstruction of density functions by sk-splines

Abstract

Reconstruction of density functions and their characteristic functions by radial basis functions with scattered data points is a popular topic in the theory of pricing of basket options. Such functions are usually entire or admit an analytic extension into an appropriate tube and "bell-shaped" with rapidly decaying tails. Unfortunately, the domain of such functions is not compact which creates various technical difficulties. We solve interpolation problem on an infinite rectangular grid for a wide range of kernel functions and calculate explicitly their Fourier transform to obtain representations for the respective density functions.