Fast Fourier transform technique for the European option pricing with double jumps

International Journal of Physical Sciences

Sumei Zhang¹ 

关键词: Fast Fourier transforms;    characteristic function;    double exponential jump diffusion;    option pricing.;   

DOI  :  10.5897/IJPS11.1631

学科分类：物理（综合）

来源: Academic Journals

【 摘 要 】

In this paper, we provided a fast algorithm for pricing European options under a double exponential jump-diffusion model based on Fourier transform. We derived a closed-form (CF) representation of the characteristic function of the model. By using fast Fourier transform (FFT) technique, we obtained an approximation numerical solution for the prices of European call options. Our numerical results show that our method is fast, accurate and easy to implement. The proposed option pricing method is useful for empirical analysis of asset returns and managing the corporate credit risks.

【 授权许可】

CC BY