Analysis of Fourier transform valuation formulas and applications
AbstractThe aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of the asset price process. An interplay between the conditions on the payoff function and the process arises naturally. We also extend these results to the multi-dimensional case, and discuss the calculation of Greeks by Fourier transform methods. As an application, we price options on the minimum of two assets in L\'evy and stochastic volatility models.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0809.3405.
Date of creation: Sep 2008
Date of revision: Sep 2009
Publication status: Published in Applied Mathematical Finance 2010, Vol. 17, No. 3, 211-240
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Web page: http://arxiv.org/
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