Analysis of Fourier Transform Valuation Formulas and Applications

Ernst Eberlein, Kathrin Glau and Antonis Papapantoleon

Applied Mathematical Finance, 2010, vol. 17, issue 3, 211-240

Abstract: The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of the asset price process. An interplay between the conditions on the payoff function and the process arises naturally. We also extend these results to the multi-dimensional case and discuss the calculation of Greeks by Fourier transform methods. As an application, we price options on the minimum of two assets in Levy and stochastic volatility models.

Keywords: Option valuation; Fourier transform; semimartingales; Levy processes; stochastic volatility models; options on several assets (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (62)

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DOI: 10.1080/13504860903326669

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