Pricing extendible options using the fast Fourier transform
This paper applies the fast Fourier transform (FFT) approach, within the Black-Scholes framework, to the valuation of options whose time to maturity can be extended to a future date (extendible options). We determine the valuation of the extendible options as sums of expectations of indicator functi...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Hindawi Publishing Corporation
2014
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| Online Access: | http://psasir.upm.edu.my/id/eprint/35048/ http://psasir.upm.edu.my/id/eprint/35048/1/Pricing%20Extendible%20Options%20Using%20the%20Fast%20Fourier%20Transform.pdf |
| _version_ | 1848847945551577088 |
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| author | Ibrahim, Siti Nur Iqmal O'Hara, John G. Constantinou, Nick |
| author_facet | Ibrahim, Siti Nur Iqmal O'Hara, John G. Constantinou, Nick |
| author_sort | Ibrahim, Siti Nur Iqmal |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper applies the fast Fourier transform (FFT) approach, within the Black-Scholes framework, to the valuation of options whose time to maturity can be extended to a future date (extendible options). We determine the valuation of the extendible options as sums of expectations of indicator functions, leading to a semianalytic expression for the value of the options over a range of strikes. Compared to Monte Carlo simulation, numerical examples demonstrate that the FFT is both computationally more efficient and higher in accuracy. |
| first_indexed | 2025-11-15T09:26:40Z |
| format | Article |
| id | upm-35048 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T09:26:40Z |
| publishDate | 2014 |
| publisher | Hindawi Publishing Corporation |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-350482015-12-29T07:37:52Z http://psasir.upm.edu.my/id/eprint/35048/ Pricing extendible options using the fast Fourier transform Ibrahim, Siti Nur Iqmal O'Hara, John G. Constantinou, Nick This paper applies the fast Fourier transform (FFT) approach, within the Black-Scholes framework, to the valuation of options whose time to maturity can be extended to a future date (extendible options). We determine the valuation of the extendible options as sums of expectations of indicator functions, leading to a semianalytic expression for the value of the options over a range of strikes. Compared to Monte Carlo simulation, numerical examples demonstrate that the FFT is both computationally more efficient and higher in accuracy. Hindawi Publishing Corporation 2014 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/35048/1/Pricing%20Extendible%20Options%20Using%20the%20Fast%20Fourier%20Transform.pdf Ibrahim, Siti Nur Iqmal and O'Hara, John G. and Constantinou, Nick (2014) Pricing extendible options using the fast Fourier transform. Mathematical Problems in Engineering, 2014. art. no. 831470. pp. 1-7. ISSN 1024-123X; ESSN: 1563-5147 http://www.hindawi.com/journals/mpe/2014/831470/abs/ 10.1155/2014/831470 |
| spellingShingle | Ibrahim, Siti Nur Iqmal O'Hara, John G. Constantinou, Nick Pricing extendible options using the fast Fourier transform |
| title | Pricing extendible options using the fast Fourier transform |
| title_full | Pricing extendible options using the fast Fourier transform |
| title_fullStr | Pricing extendible options using the fast Fourier transform |
| title_full_unstemmed | Pricing extendible options using the fast Fourier transform |
| title_short | Pricing extendible options using the fast Fourier transform |
| title_sort | pricing extendible options using the fast fourier transform |
| url | http://psasir.upm.edu.my/id/eprint/35048/ http://psasir.upm.edu.my/id/eprint/35048/ http://psasir.upm.edu.my/id/eprint/35048/ http://psasir.upm.edu.my/id/eprint/35048/1/Pricing%20Extendible%20Options%20Using%20the%20Fast%20Fourier%20Transform.pdf |