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Jurnal

Journal of Financial Economics

Keyword

Universal quadrature; QUAD; Option pricing; Numerical techniques; Transition density function

Pengarang

  1. Ding Chen,
  2. Hannu J. Härkönen,
  3. David P. Newton

    Subject

    Economics

    [Abstrak]

    Exceptional accuracy and speed for option pricing are available via quadrature (Andricopoulos, Widdicks, Duck, and Newton, 2003), extending into multiple dimensions with complex path-dependency and early exercise (Andricopoulos, Widdicks, Newton, and Duck, 2007). However, the exposition is incomplete, leaving many modelling processes outside the Black-Scholes-Merton framework unattainable. We show how to remove the remaining major block to universal application. Although this had appeared highly problematic, the solution turns out to be conceptually simple and implementation is straightforward (we provide code on the Journal of Financial Economics website at http://jfe.rochester.edu). Crucially, the method retains its speed and flexibility across complex combinations of option features but is now applicable across other underlying processes

    Periode

    Vol 114, Nomor 3, Tahun 2014

    [Berkas]

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