Pricing of the European Options by Spectral Theory
We discuss the eﬃciency of the spectral method for computing the value of the European Call Options, which is based upon the Fourier series expansion. We propose a simple approach for computing accurate estimates. We consider the general case, in which the volatility is time dependent, but it is immediate extend our methodology at the case of constant volatility. The advantage to write the arbitrage price of the European Call Options as Fourier series, is matter of computation complexity. Infact, the methods used to evaluate options of this kind have a high value of computation complexity, furthermore, them have not the capacity to manage it. We can deﬁne, by an easy analytical relation, the computation complexity of the problem in the framework of general theory of the ”Function Analysis”, called The Spectral Theory.
|Date of creation:||25 Mar 2008|
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