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SIAMSC
2016

A Highly Efficient Shannon Wavelet Inverse Fourier Technique for Pricing European Options

3 years 16 days ago
A Highly Efficient Shannon Wavelet Inverse Fourier Technique for Pricing European Options
In the search for robust, accurate, and highly efficient financial option valuation techniques, we here present the SWIFT method (Shannon wavelets inverse Fourier technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative error bounds. The nature of the local Shannon wavelets basis enables us to adaptively determine the proper size of the computational interval. Numerical experiments on European-style options show exponential convergence and confirm the bounds, robustness, and efficiency. Key words. option pricing, European options, Shannon wavelets, sinus cardinal function, Fourier transform inversion AMS subject classifications. 62P05, 60E10, 65T60 DOI. 10.1137/15M1014164
Luis Ortiz-Gracia, Cornelis W. Oosterlee
Added 09 Apr 2016
Updated 09 Apr 2016
Type Journal
Year 2016
Where SIAMSC
Authors Luis Ortiz-Gracia, Cornelis W. Oosterlee
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