SINH-ACCELERATION FOR B-SPLINE PROJECTION WITH OPTION PRICING APPLICATIONS

Svetlana Boyarchenko, Sergei Levendorskiä¬, J. Lars Kyrkby () and Zhenyu Cui ()
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Sergei Levendorskiä¬: Calico Science Consulting, Austin, TX 78748, USA
J. Lars Kyrkby: ISYE, Georgia Institute of Technology, 755 Ferst Dr., Atlanta, GA 30313, USA
Zhenyu Cui: School of Business, Stevens Institute of Technology, Babbio Dr., Hoboken, NJ 07030, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2021, vol. 24, issue 08, 1-50

Abstract: We clarify the relations among different Fourier-based approaches to option pricing, and improve the B-spline probability density projection method using the sinh-acceleration technique. This allows us to efficiently separate the control of different sources of errors better than the FFT-based realization allows; in many cases, the CPU time decreases as well. We demonstrate the improvement of the B-spline projection method through several numerical experiments in option pricing, including European and barrier options, where the SINH acceleration technique proves to be robust and accurate.

Keywords: Options pricing; inverse Fourier transform; sinh-acceleration; barrier options; B-splines (search for similar items in EconPapers)
Date: 2021
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Working Paper: SINH-acceleration for B-spline projection with Option Pricing Applications (2021)
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DOI: 10.1142/S0219024921500400

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