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Efficient pricing of swing options in L�vy-driven models

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  • Oleg Kudryavtsev
  • Antonino Zanette

Abstract

We consider the problem of pricing swing options with multiple exercise rights in L�vy-driven models. We propose an efficient Wiener--Hopf factorization method that solves multiple parabolic partial integro-differential equations associated with the pricing problem. We compare the proposed method with a finite difference algorithm. Both proposed deterministic methods are related to the dynamic programming principle and lead to the solution of a multiple optimal stopping problem. Numerical examples illustrate the efficiency and the precision of the proposed methods.

Suggested Citation

  • Oleg Kudryavtsev & Antonino Zanette, 2013. "Efficient pricing of swing options in L�vy-driven models," Quantitative Finance, Taylor & Francis Journals, vol. 13(4), pages 627-635, March.
    • Handle: RePEc:taf:quantf:v:13:y:2013:i:4:p:627-635
    DOI: 10.1080/14697688.2012.717708
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    References listed on IDEAS

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    Cited by:

    1. J. Lars Kirkby & Shi-Jie Deng, 2019. "Swing Option Pricing By Dynamic Programming With B-Spline Density Projection," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(08), pages 1-53, December.

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