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arXiv · 0809.3405

Analysis of Fourier transform valuation formulas and applications

Ernst Eberlein·Kathrin Glau·Antonis Papapantoleon
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Abstract

The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of the asset price process. An interplay between the conditions on the payoff function and the process arises naturally. We also extend these results to the multi-dimensional case, and discuss the calculation of Greeks by Fourier transform methods. As an application, we price options on the minimum of two assets in Lévy and stochastic volatility models.

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Ernst Eberlein, Kathrin Glau, Antonis Papapantoleon. 2009-09-24. Analysis of Fourier transform valuation formulas and applications. https://doi.org/10.1080/13504860903326669

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