Journal
SIAM JOURNAL ON SCIENTIFIC COMPUTING
Volume 38, Issue 1, Pages B118-B143Publisher
SIAM PUBLICATIONS
DOI: 10.1137/15M1014164
Keywords
option pricing; European options; Shannon wavelets; sinus cardinal function; Fourier transform inversion
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In the search for robust, accurate, and highly efficient financial option valuation techniques, we here present the SWIFT method (Shannon wavelets inverse Fourier technique), based on Shannon wavelets. SWIFT comes with control over approximation errors made by means of sharp quantitative error bounds. The nature of the local Shannon wavelets basis enables us to adaptively determine the proper size of the computational interval. Numerical experiments on European-style options show exponential convergence and confirm the bounds, robustness, and efficiency.
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