An efficient algorithm for Bermudan barrier option pricing. (English) Zbl 1265.62035
Summary: An efficient option pricing method based on Fourier-cosine expansions was presented by F. Fang and C.W. Oosterlee [SIAM J. Sci. Comput. 31, No. 2, 826–848 (2008; Zbl 1186.91214)] for European options in 2008, and later this method was also used by them to price early exercise options and barrier options, respectively, in 2009. In this paper, this method is applied to price discretely American barrier options in which the monitored dates are many times more than the exercise dates. The corresponding algorithm is presented to practical option pricing. Numerical experiments show that this algorithm works very well and efficiently for different exponential Lévy asset models.
MSC:
| 62P05 | Applications of statistics to actuarial sciences and financial mathematics |
| 91B25 | Asset pricing models (MSC2010) |
| 91G20 | Derivative securities (option pricing, hedging, etc.) |
| 42A10 | Trigonometric approximation |
| 65T50 | Numerical methods for discrete and fast Fourier transforms |
| 65C60 | Computational problems in statistics (MSC2010) |
Citations:
Zbl 1186.91214References:
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