Efficient pricing of swing options in L�vy-driven models

Oleg Kudryavtsev and Antonino Zanette

Quantitative Finance, 2013, vol. 13, issue 4, 627-635

Abstract: We consider the problem of pricing swing options with multiple exercise rights in L�vy-driven models. We propose an efficient Wiener--Hopf factorization method that solves multiple parabolic partial integro-differential equations associated with the pricing problem. We compare the proposed method with a finite difference algorithm. Both proposed deterministic methods are related to the dynamic programming principle and lead to the solution of a multiple optimal stopping problem. Numerical examples illustrate the efficiency and the precision of the proposed methods.

Date: 2013
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DOI: 10.1080/14697688.2012.717708

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