UNIGE document Working paper
previous document  unige:41856  next document
add to browser collection
Title

Valuing American options using fast recursive projections

Authors
Cosma, Antonio
Galluccio, Stefano
Year 2012
Description 46 p.
Abstract This paper introduces a new numerical option pricing method by fast recursive projections. The projection step consists in representing the payoff and the state price density with a fast discrete transform based on a simple grid sampling. The recursive step consists in transmitting coefficients of the representation from one date to the previous one by an explicit recursion formula. We characterize the convergence rate of the computed option price. Numerical illustrations with different American and Bermudan payoffs with discrete dividend paying stocks in the Black-Scholes and Heston models show that the method is fast, accurate, and general.
Keywords Option pricingAmerican optionBermudan optionDiscrete transformDiscrete dividend paying stockNumerical techniques
Identifiers
Full text
Working paper (Author postprint) (873 Kb) - public document Free access
Structures
Citation
(ISO format)
COSMA, Antonio, GALLUCCIO, Stefano, SCAILLET, Olivier. Valuing American options using fast recursive projections. 2012 https://archive-ouverte.unige.ch/unige:41856

414 hits

150 downloads

Update

Deposited on : 2014-11-16

Export document
Format :
Citation style :