A Fast and Accurate FFT-Based Method for Pricing Early-Exercise Options Under Levy Processes

A Fast and Accurate Fft-based Method for Pricing Early-exercise Options under Lévy Processes

A fast and accurate method for pricing early exercise and certain exotic options in computational finance is presented. The method is based on a quadrature technique and relies heavily on Fourier transformations. The main idea is to reformulate the well-known risk-neutral valuation formula by recognising that it is a convolution. The resulting convolution is dealt with numerically by using the ...

A Fast Method for Pricing Early-Exercise Options with the FFT

A fast and accurate method for pricing early exercise options in computational finance is presented in this paper. The main idea is to reformulate the well-known risk-neutral valuation formula by recognizing that it is a convolution. This novel pricing method, which we name the ‘CONV’ method for short, is applicable to a wide variety of payoffs and only requires the knowledge of the characteris...

Fast and accurate pricing of barrier options under Lévy processes

We suggest two new fast and accurate methods, Fast Wiener-Hopf method (FWH-method) and Iterative Wiener-Hopf method (IWH-method), for pricing barrier options for a wide class of Lévy processes. Both methods use the Wiener-Hopf factorization and Fast Fourier Transform algorithm. Using an accurate albeit relatively slow finite-difference algorithm developed in Levendorskǐi et al (2006) (FDS-metho...

A fast high-order sinc-based algorithm for pricing options under jump-diffusion processes

An implicit-explicit Euler scheme in temporal direction is employed to discretize a partial integro-differential equation, which arises in pricing options under jumpdiffusion process. Then the semi-discretized equation is approximated in space by the Sinc-Galerkin method with exponential accuracy. Meanwhile, the domain decomposition method is incorporated to handle the non-smoothness of the pay...

A General Framework for Pricing Asian Options Under Markov Processes