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

Preview

Text 831470.pdf - Published Version Available under License Creative Commons Attribution. Download (2MB) | Preview

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
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

Actions (login required)

View Item