ULTRA-FAST PRICING BARRIER OPTIONS AND CDSs

Sergei Levendorskiĭ ()
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Sergei Levendorskiĭ: Calico Science Consulting, Austin, TX 78748, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2017, vol. 20, issue 05, 1-27

Abstract: We construct a new approximate method for pricing barrier options and CDSs. In many cases, prices of barrier options and CDS of maturities T ≥ 1 years, at the log-distance 0.1 from the barrier and farther, for eight spots, can be calculated adding up 4–16 fairly simple terms, with relative errors of order 5 ⋅ 10−5 and smaller, in 4–12msc.

Keywords: Spectrally one-sided Lévy processes; Wiener–Hopf factorization; barrier options; credit default swaps; Laplace transform; parabolic inverse Laplace transform (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219024917500339

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