The pricing of multi-asset options using a Fourier grid method

Bernard Engelmann and Peter Schwendner

Journal of Computational Finance

Abstract: ABSTRACT This paper is the first of a series of papers about exotic multi-asset options. A numerical tool for the pricing of European path-independent multi-asset options with arbitrary payoff and exercise prices is presented. The generalized Black-Scholes partial differential equation is solved by means of an efficient Fourier grid method. The accuracy of the method is demonstrated by the pricing of of options on the minimum or the maximum of three risky assets.

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