TY - JOUR
T1 - Pricing early-exercise and discrete barrier options by Shannon wavelet expansions
AU - Maree, S.C.
AU - Ortiz-Gracia, L.
AU - Oosterlee, C.W.
PY - 2017
Y1 - 2017
N2 - We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential Lévy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods.
AB - We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential Lévy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence. Application of the Fast Fourier Transform yields an efficient implementation and since wavelets give local approximations, the domain boundary errors can be naturally resolved, which is the main improvement over existing methods.
UR - http://www.scopus.com/inward/record.url?eid=2-s2.0-85007575195&partnerID=MN8TOARS
U2 - 10.1007/s00211-016-0858-2
DO - 10.1007/s00211-016-0858-2
M3 - Article
SN - 0029-599X
VL - 136
SP - 1035
EP - 1070
JO - Numerische Mathematik
JF - Numerische Mathematik
ER -