Pricing European Options by Stable Fourier-Cosine Series Expansions

Chunfa Wang

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Pricing European Options by Stable Fourier-Cosine Series Expansions

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arxiv 1701.00886 v2 pith:PXV4ANXH submitted 2017-01-04 q-fin.CP q-fin.MF

Pricing European Options by Stable Fourier-Cosine Series Expansions

Chunfa Wang This is my paper

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The COS method proposed in Fang and Oosterlee (2008), although highly efficient, may lack robustness for a number of cases. In this paper, we present a Stable pricing of call options based on Fourier cosine series expansion. The Stability of the pricing methods is demonstrated by error analysis, as well as by a series of numerical examples, including the Heston stochastic volatility model, Kou jump-diffusion model, and CGMY model.

Pricing European Options by Stable Fourier-Cosine Series Expansions

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