Pricing early-exercise and discrete barrier options by Shannon wavelet expansions

S. C. Maree; L. Ortiz-Gracia; C. W. Oosterlee

doi:10.1007/s00211-016-0858-2

Pricing early-exercise and discrete barrier options by Shannon wavelet expansions

S. C. Maree
, L. Ortiz-Gracia
, C. W. Oosterlee

Research output: Contribution to journal › Article › Academic › peer-review

15 Downloads (Pure)

Abstract

We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential L,vy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods

Original language	English
Pages (from-to)	1035-1070
Journal	Numerische Mathematik
Volume	136
Issue number	4
DOIs	https://doi.org/10.1007/s00211-016-0858-2
Publication status	Published - 2017

Access to Document

10.1007/s00211-016-0858-2

Pricing-early-exercise-and-discrete-barrier-options-by-shannon-wavelet-expansions.pdfFinal published version, 957 KBLicence: Taverne

Cite this

@article{82db0d6e89b844258b4b0abec13ffe47,

title = "Pricing early-exercise and discrete barrier options by Shannon wavelet expansions",

abstract = "We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential L,vy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods",

author = "Maree, \{S. C.\} and L. Ortiz-Gracia and Oosterlee, \{C. W.\}",

year = "2017",

doi = "10.1007/s00211-016-0858-2",

language = "English",

volume = "136",

pages = "1035--1070",

journal = "Numerische Mathematik",

issn = "0029-599X",

publisher = "Springer New York",

number = "4",

}

TY - JOUR

T1 - Pricing early-exercise and discrete barrier options by Shannon wavelet expansions

AU - Maree, S. C.

AU - Ortiz-Gracia, L.

AU - Oosterlee, C. W.

PY - 2017

Y1 - 2017

N2 - We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential L,vy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods

AB - We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential L,vy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods

U2 - 10.1007/s00211-016-0858-2

DO - 10.1007/s00211-016-0858-2

M3 - Article

SN - 0029-599X

VL - 136

SP - 1035

EP - 1070

JO - Numerische Mathematik

JF - Numerische Mathematik

IS - 4

ER -

Pricing early-exercise and discrete barrier options by Shannon wavelet expansions

Abstract

Access to Document

Fingerprint

Cite this