Analysis of quadrature methods for pricing discrete barrier options

被引：45
作者：
Fusai, Gianluca
Recchioni, Maria Cristina
机构：
[1] Univ Piemonte Orientale, Dipartimento SEMEQ, I-28100 Novara, Italy
[2] Warwick Business Sch, Financial Opt Res Ctr, Warwick, England
[3] Univ Politecn Marche, Dipartimento Sci Sociali D Serrani, I-60121 Ancona, Italy
来源：
JOURNAL OF ECONOMIC DYNAMICS & CONTROL | 2007年 / 31卷 / 03期
关键词：
barrier options; discrete monitoring; interpolation; quadrature; Black-Scholes; variance-gamma; CEV process;
D O I：
10.1016/j.jedc.2006.03.002
中图分类号：
F [经济];
学科分类号：
02 ;
摘要：
In the present paper we provide an analysis of a quadrature method combined with an interpolation procedure for the valuation of discrete barrier options. The convergence of the method is proved and the computational cost is found to be linear in the number of monitoring dates and quadratic in the spatial discretization. Moreover, we provide an estimate of the error for a given computational time budget. Finally, we discuss extensively the empirical performance of the method, including the calculation of the delta and gamma coefficients, and we compare the GBM, CEV and variance gamma (VG) stochastic specifications. (C) 2006 Elsevier B.V. All rights reserved.
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收藏
页码：826 / 860
页数：35
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