On the Efficacy of Fourier Series Approximations for Pricing European Options

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References

[1] Johannes, M.S., Polson, N.G. and Stroud, J.R. (2009) Optimal Filtering of Jump Diffusions: Extracting Latent States from Asset Prices. Review of Financial Studies, 22, 2759-2799.

http://dx.doi.org/10.1093/rfs/hhn110

[2] Broadie, M., Chernov, M. and Johannes, M. (2007) Model Specification and Risk Premia: Evidence from Futures Options. Journal of Finance, 62, 1453-1490.

http://dx.doi.org/10.1111/j.1540-6261.2007.01241.x

[3] Christoffersen, P., Jacobs, K. and Mimouni, K. (2010) Volatility Dynamics for the S&P500: Evidence from Realized Volatility, Daily Returns and Option Prices. Review of Financial Studies, 23, 3141-3189.

http://dx.doi.org/10.1093/rfs/hhq032

[4] Hurn, A.S., Lindsay, K.A. and McClelland, A.J. (2012) Estimating the Parameters of Stochastic Volatility Models Using Option Price Data. Unpublished Working Paper, NCER.

[5] Andersen, T.G., Fusari, N. and Todorov, V. (2012) Parametric Inference and Dynamic State Recovery from Option Panels. NBER Working Paper Series.

[6] Carr, P.P. and Madan, D.B. (1999) Option Evaluation Using the Fast Fourier Transform. Journal of Computational Finance, 2, 61-73.

[7] Borak, S., Detlefsen, K. and Hardle, W. (2005) FFT Based Option Pricing. SFB Discussion Paper 649.

[8] Lord, R., Fang, F. Bervoets, F. and Oosterlee, C.W. (2007) A Fast and Accurate FFT-Based Methodology for Pricing Early-Exercise Options under Levy Processes. SIAM Journal of Scientific Computing, 20, 1678-1705.

[9] Kwok, Y.K., Leung, K.S. and Wong, H.Y. (2012) Efficient Options Pricing Using the Fast Fourier Transform. In: Duan, J.C., Ed., Handbook of Computational Finance, Springer, Berlin, 579-604.

http://dx.doi.org/10.1007/978-3-642-17254-0_21

[10] Fang, F. and Oosterlee, C.W. (2008) A Novel Pricing Method for European Options Based on Fourier-Cosine Series Expansions. SIAM Journal on Scientific Computing, 31, 826-848.

http://dx.doi.org/10.1137/080718061

[11] Zhang, B., Grzelak, L.A. and Oosterlee, C.W. (2012) Efficient Pricing of Commodity Options with Earlyexercise under the Ornstein-Uhlenbeck Process. Applied Numerical Mathematics, 62, 91-111.

http://dx.doi.org/10.1016/j.apnum.2011.10.005

[12] Heston, S.L. (1993) A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options. Review of Financial Studies, 6, 327-343.

[13] Black, F. and Scholes, M. (1973) The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81, 637-654.

http://dx.doi.org/10.1086/260062

[14] Johannes, M.S., Polson, N.G. and Stroud, J.R. (2009) Optimal Filtering of Jump Diffusions: Extracting Latent States from Asset Prices. Review of Financial Studies, 22, 2759-2799.

http://dx.doi.org/10.1093/rfs/hhn110

[15] Broadie, M., Chernov, M. and Johannes, M. (2007) Model Specification and Risk Premia: Evidence from Futures Options. Journal of Finance, 62, 1453-1490.

http://dx.doi.org/10.1111/j.1540-6261.2007.01241.x

[16] Christoffersen, P., Jacobs, K. and Mimouni, K. (2010) Volatility Dynamics for the S&P500: Evidence from Realized Volatility, Daily Returns and Option Prices. Review of Financial Studies, 23, 3141-3189.

http://dx.doi.org/10.1093/rfs/hhq032

[17] Hurn, A.S., Lindsay, K.A. and McClelland, A.J. (2012) Estimating the Parameters of Stochastic Volatility Models Using Option Price Data. Unpublished Working Paper, NCER.

[18] Andersen, T.G., Fusari, N. and Todorov, V. (2012) Parametric Inference and Dynamic State Recovery from Option Panels. NBER Working Paper Series.

[19] Carr, P.P. and Madan, D.B. (1999) Option Evaluation Using the Fast Fourier Transform. Journal of Computational Finance, 2, 61-73.

[20] Borak, S., Detlefsen, K. and Hardle, W. (2005) FFT Based Option Pricing. SFB Discussion Paper 649.

[21] Lord, R., Fang, F. Bervoets, F. and Oosterlee, C.W. (2007) A Fast and Accurate FFT-Based Methodology for Pricing Early-Exercise Options under Levy Processes. SIAM Journal of Scientific Computing, 20, 1678-1705.

[22] Kwok, Y.K., Leung, K.S. and Wong, H.Y. (2012) Efficient Options Pricing Using the Fast Fourier Transform. In: Duan, J.C., Ed., Handbook of Computational Finance, Springer, Berlin, 579-604.

http://dx.doi.org/10.1007/978-3-642-17254-0_21

[23] Fang, F. and Oosterlee, C.W. (2008) A Novel Pricing Method for European Options Based on Fourier-Cosine Series Expansions. SIAM Journal on Scientific Computing, 31, 826-848.

http://dx.doi.org/10.1137/080718061

[24] Zhang, B., Grzelak, L.A. and Oosterlee, C.W. (2012) Efficient Pricing of Commodity Options with Earlyexercise under the Ornstein-Uhlenbeck Process. Applied Numerical Mathematics, 62, 91-111.

http://dx.doi.org/10.1016/j.apnum.2011.10.005

[25] Heston, S.L. (1993) A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options. Review of Financial Studies, 6, 327-343.

[26] Black, F. and Scholes, M. (1973) The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81, 637-654.

http://dx.doi.org/10.1086/260062