Dell'Era Mario, M.D. (2008): Pricing of Double Barrier Options by Spectral Theory.
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Abstract
We propose to discuss the efficiency of the spectral method for computing the value of Double Barrier Options. Using this method, one may write the option price as a Fourier series, with suitable coefficients. We propose a simple approach for its computing. One consider the general case, in which the volatility is time dependent, but it is immediate extend our methodology also in the case of constant volatility. The advantage to write the arbitrage price of the Double Barrier Options as Fourier series, is matter of computation complexity. The methods used to evaluate options of this kind have a high value of computation complexity, furthermore, them have not the capacity to manage it, while using our method, one can define, through an easy analytical report, the computation complexity of the problem, and also one can choice its accuracy. The results obtained are compared with those given from several authors that have used different ways to compute the price, from MonteCarlo method to that of Laplace transform. Our results are compatible with those obtained from GemanYor and KunitomoIkeda, but unlike them we are able to improve the accuracy with little effort of calculus.
Item Type:  MPRA Paper 

Original Title:  Pricing of Double Barrier Options by Spectral Theory 
English Title:  Pricing of Double Barrier Options by Spectral Theory 
Language:  English 
Keywords:  Options Pricing, Computation Complexity. 
Subjects:  G  Financial Economics > G1  General Financial Markets > G12  Asset Pricing; Trading volume; Bond Interest Rates G  Financial Economics > G1  General Financial Markets > G13  Contingent Pricing; Futures Pricing 
Item ID:  17548 
Depositing User:  Mario Dell'Era 
Date Deposited:  27. Sep 2009 16:57 
Last Modified:  12. Feb 2013 21:44 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/17548 
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Pricing of Double Barrier Options by Spectral Theory. (deposited 25. Sep 2009 09:04)
 Pricing of Double Barrier Options by Spectral Theory. (deposited 27. Sep 2009 16:57) [Currently Displayed]