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Notes on the SWIFT method based on Shannon Wavelets for Option Pricing

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  • Fabien Le Floc'h

Abstract

This note shows that the cosine expansion based on the Vieta formula is equivalent to a discretization of the Parseval identity. We then evaluate the use of simple direct algorithms to compute the Shannon coefficients for the payoff. Finally, we explore the efficiency of a Filon quadrature instead of the Vieta formula for the coefficients related to the probability density function.

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  • Fabien Le Floc'h, 2020. "Notes on the SWIFT method based on Shannon Wavelets for Option Pricing," Papers 2005.13252, arXiv.org.
    • Handle: RePEc:arx:papers:2005.13252
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    References listed on IDEAS

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    1. Fang, Fang & Oosterlee, Kees, 2008. "A Novel Pricing Method For European Options Based On Fourier-Cosine Series Expansions," MPRA Paper 9319, University Library of Munich, Germany.
    2. Roger Lord & Christian Kahl, 2006. "Optimal Fourier Inversion in Semi-analytical Option Pricing," Tinbergen Institute Discussion Papers 06-066/2, Tinbergen Institute, revised 05 Jun 2007.
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