Error analysis in Fourier methods for option pricing for exponential Lévy processes

Handle URI:
http://hdl.handle.net/10754/624051
Title:
Error analysis in Fourier methods for option pricing for exponential Lévy processes
Authors:
Crocce, Fabian; Häppölä, Juho; Keissling, Jonas; Tempone, Raul ( 0000-0003-1967-4446 )
Abstract:
We derive an error bound for utilising the discrete Fourier transform method for solving Partial Integro-Differential Equations (PIDE) that describe european option prices for exponential Lévy driven asset prices. We give sufficient conditions for the existence of a L? bound that separates the dynamical contribution from that arising from the type of the option n in question. The bound achieved does not rely on information of the asymptotic behaviour of option prices at extreme asset values. In addition, we demonstrate improved numerical performance for select examples of practical relevance when compared to established bounding methods.
KAUST Department:
Computer, Electrical and Mathematical Sciences and Engineering (CEMSE) Division; Applied Mathematics and Computational Science Program; Computer, Electrical and Mathematical Sciences & Engineering (CEMSE)
Conference/Event name:
Advances in Uncertainty Quantification Methods, Algorithms and Applications (UQAW 2015)
Issue Date:
7-Jan-2015
Type:
Poster
Appears in Collections:
Posters; Applied Mathematics and Computational Science Program; Computer, Electrical and Mathematical Sciences and Engineering (CEMSE) Division; Conference on Advances in Uncertainty Quantification Methods, Algorithms and Applications (UQAW 2015)

Full metadata record

DC FieldValue Language
dc.contributor.authorCrocce, Fabianen
dc.contributor.authorHäppölä, Juhoen
dc.contributor.authorKeissling, Jonasen
dc.contributor.authorTempone, Raulen
dc.date.accessioned2017-06-05T08:35:46Z-
dc.date.available2017-06-05T08:35:46Z-
dc.date.issued2015-01-07-
dc.identifier.urihttp://hdl.handle.net/10754/624051-
dc.description.abstractWe derive an error bound for utilising the discrete Fourier transform method for solving Partial Integro-Differential Equations (PIDE) that describe european option prices for exponential Lévy driven asset prices. We give sufficient conditions for the existence of a L? bound that separates the dynamical contribution from that arising from the type of the option n in question. The bound achieved does not rely on information of the asymptotic behaviour of option prices at extreme asset values. In addition, we demonstrate improved numerical performance for select examples of practical relevance when compared to established bounding methods.en
dc.titleError analysis in Fourier methods for option pricing for exponential Lévy processesen
dc.typePosteren
dc.contributor.departmentComputer, Electrical and Mathematical Sciences and Engineering (CEMSE) Divisionen
dc.contributor.departmentApplied Mathematics and Computational Science Programen
dc.contributor.departmentComputer, Electrical and Mathematical Sciences & Engineering (CEMSE)en
dc.conference.dateJanuary 6-9, 2015en
dc.conference.nameAdvances in Uncertainty Quantification Methods, Algorithms and Applications (UQAW 2015)en
dc.conference.locationKAUSTen
kaust.authorCrocce, Fabianen
kaust.authorHäppölä, Juhoen
kaust.authorKeissling, Jonasen
kaust.authorTempone, Raulen
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