Efficient Option Pricing Methods Based on Fourier Series Expansions
Received:November 11, 2009  Revised:January 19, 2010
Key Word: option pricing   L\'evy process   Fourier transform   Fourier expansions.  
Fund ProjectL:Supported by the Research Grant of University of Macau (Grants Nos.UL020/08-Y3/MAT/JXQ01/FST; RG058/09-10S/DD/FST).
Author NameAffiliation
Deng DING Department of Mathematics, University of Macau, Macao, P. R. China 
Sio Chong U Department of Mathematics, University of Macau, Macao, P. R. China 
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Abstract:
      A novel option pricing method based on Fourier-cosine series expansion was proposed by Fang and Oosterlee. Developing their idea, three new option pricing methods based on Fourier, Fourier-cosine and Fourier-sine series expansions are presented in this paper, which are more efficient when the option prices are calculated with many strike prices. A series of numerical experiments under different exp-L\'evy models are also given to compare these new methods with the Fang and Oosterlee's method and other methods.
Citation:
DOI:10.3770/j.issn:1000-341X.2011.01.002
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