Citation
Ibrahim, Siti Nur Iqmal and O'Hara, John G. and Constantinou, Nick
(2014)
Pricing extendible options using the fast Fourier transform.
Mathematical Problems in Engineering, 2014.
art. no. 831470.
pp. 1-7.
ISSN 1024-123X; ESSN: 1563-5147
Abstract
This paper applies the fast Fourier transform (FFT) approach, within the Black-Scholes framework, to the valuation of options whose time to maturity can be extended to a future date (extendible options). We determine the valuation of the extendible options as sums of expectations of indicator functions, leading to a semianalytic expression for the value of the options over a range of strikes. Compared to Monte Carlo simulation, numerical examples demonstrate that the FFT is both computationally more efficient and higher in accuracy.
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Additional Metadata
| Item Type: | Article |
|---|---|
| Divisions: | Faculty of Science Institute for Mathematical Research |
| DOI Number: | https://doi.org/10.1155/2014/831470 |
| Publisher: | Hindawi Publishing Corporation |
| Keywords: | Extendible options; Fast Fourier transform; Price options |
| Depositing User: | Nurul Ainie Mokhtar |
| Date Deposited: | 29 Dec 2015 07:37 |
| Last Modified: | 29 Dec 2015 07:37 |
| Altmetrics: | http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1155/2014/831470 |
| URI: | http://psasir.upm.edu.my/id/eprint/35048 |
| Statistic Details: | View Download Statistic |
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