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. pp. 1-7. ISSN 1024-123X
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Abstract
<jats:p>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.</jats:p>
Item Type: | Article |
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Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics > QA75 Electronic computers. Computer science |
Divisions: | Faculty of Science and Health Faculty of Science and Health > Mathematical Sciences, Department of |
SWORD Depositor: | Elements |
Depositing User: | Elements |
Date Deposited: | 29 Jul 2014 12:22 |
Last Modified: | 15 Jan 2022 00:33 |
URI: | http://repository.essex.ac.uk/id/eprint/9877 |
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