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Pricing Early-Exercise and Discrete Barrier Options by Shannon Wavelet Expansions

Pricing early-exercise and discrete barrier options by Shannon wavelet expansions
Authors: S. C. Maree; Luis Ortiz-Gracia; Cornelis W. Oosterlee;

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 Lévy 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.

Countries
Spain, Netherlands
Keywords

Anàlisi de Fourier, Derivative securities (option pricing, hedging, etc.), Numerical methods (including Monte Carlo methods), Anàlisi financera, Numerical integration, Numerical methods for wavelets, Investment analysis, Transformacions (Matemàtica), Transformations (Mathematics), Fourier analysis

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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15
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101
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