Two-dimensional Fourier cosine series expansion method for pricing financial options
In financial markets, traders deal in assets and options. There exist many types of options and the best-known are the European call and put option. These options give holders the right to buy or sell assets at a specific future time for a predetermined price. This paper examines options of which the payoff depends on two or more different assets. It may involve, for example, an average or the maximum of several asset prices. For pricing options, different types of numerical methods are available, such as Monte Carlo simulation techniques and partial differential equation methods. We apply a method based on Fourier cosine series expansions, called the COS method. We extend this method to higher dimensions with a multidimensional asset-price process and perform extensive numerical experiments. �
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- Fang, Fang & Oosterlee, Kees, 2008.
"A Novel Pricing Method For European Options Based On Fourier-Cosine Series Expansions,"
7700, University Library of Munich, Germany.
- 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.
- Agnieszka Janek & Tino Kluge & RafaÅ‚ Weron & Uwe Wystup, 2010.
"FX Smile in the Heston Model,"
SFB 649 Discussion Papers
SFB649DP2010-047, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Agnieszka Janek & Tino Kluge & Rafal Weron & Uwe Wystup, 2010. "FX Smile in the Heston Model," Papers 1010.1617, arXiv.org.
- Agnieszka Janek & Tino Kluge & Rafal Weron & Uwe Wystup, 2010. "FX Smile in the Heston Model," HSC Research Reports HSC/10/02, Hugo Steinhaus Center, Wroclaw University of Technology.
- Janek, Agnieszka & Kluge, Tino & Weron, Rafal & Wystup, Uwe, 2010. "FX Smile in the Heston Model," MPRA Paper 25491, University Library of Munich, Germany.
- Fang, Fang & Oosterlee, Kees, 2008. "Pricing Early-Exercise and Discrete Barrier Options by Fourier-Cosine Series Expansions," MPRA Paper 9248, University Library of Munich, Germany.
- Stefano, Pagliarani & Pascucci, Andrea & Candia, Riga, 2011. "Expansion formulae for local Lévy models," MPRA Paper 34571, University Library of Munich, Germany.
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- Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-43.
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