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Efficient pricing options under regime switching

Oleg Kudryavtsev 1
1 MATHFI - Financial mathematics
Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Abstract : In the paper, we propose two new efficient methods for pricing barrier option in wide classes of Lévy processes with/without regime switching. Both methods are based on the numerical Laplace transform inversion formulae and the Fast Wiener-Hopf factorization method developed in Kudryavtsev and Levendorski\v{i} (Finance Stoch. 13: 531--562, 2009). The first method uses the Gaver-Stehfest algorithm, the second one -- the Post-Widder formula. We prove the advantage of the new methods in terms of accuracy and convergence by using Monte-Carlo simulations.
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https://hal.inria.fr/inria-00450291
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Submitted on : Tuesday, January 26, 2010 - 9:55:40 AM
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Oleg Kudryavtsev. Efficient pricing options under regime switching. [Research Report] RR-7184, INRIA. 2010, pp.35. ⟨inria-00450291⟩

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