|
|||||
|
|
Efficient pricing of commodity options with early-exercise under the Ornstein-Uhlenbeck process |
|
| Authors: | B Zhang LA Grzelak CW Oosterlee |
| Institution: | a Delft University of Technology, Mekelweg 4, 2628CD, Delft, The Netherlands b Rabobank International, Utrecht, The Netherlands c CWI - Centrum Wiskunde & Informatica, Amsterdam, The Netherlands |
| Abstract: | We analyze the efficiency properties of a numerical pricing method based on Fourier-cosine expansions for early-exercise options. We focus on variants of Schwartz? model based on a mean reverting Ornstein-Uhlenbeck process, which is commonly used for modeling commodity prices. This process however does not possess favorable properties for the option pricing method of interest. We therefore propose an approximation of its characteristic function, so that the Fast Fourier Transform can be applied for highest efficiency. |
| Keywords: | Early-exercise commodity options Efficient pricing Fourier-cosine expansions Ornstein-Uhlenbeck process Error analysis |
| 本文献已被 ScienceDirect 等数据库收录！ | |