Pricing of Double Barrier Options by Spectral Theory

M.D. Dell'Era Mario

MPRA Paper from University Library of Munich, Germany

Abstract: We propose to discuss the efficiency of the spectral method for computing the value of Double Barrier Options. Using this method, one may write the option price as a Fourier series, with suitable coefficients. We propose a simple approach for its computing. One consider the general case, in which the volatility is time dependent, but it is immediate extend our methodology also in the case of constant volatility. The advantage to write the arbitrage price of the Double Barrier Options as Fourier series, is matter of computation complexity. The methods used to evaluate options of this kind have a high value of computation complexity, furthermore, them have not the capacity to manage it, while using our method, one can define, through an easy analytical report, the computation complexity of the problem, and also one can choice its accuracy.

Keywords: Options Pricing; Computation Complexity. (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2008-03-25
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https://mpra.ub.uni-muenchen.de/17548/2/MPRA_paper_17548.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17502

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