Related papers: Notes on the SWIFT method based on Shannon Wavelet…
This note revisits the SWIFT method based on Shannon wavelets to price European options under models with a known characteristic function in 2023. In particular, it discusses some possible improvements and exposes some concrete drawbacks of…
We propose a numerical algorithm for backward stochastic differential equations based on time discretization and trigonometric wavelets. This method combines the effectiveness of Fourier-based methods and the simplicity of a wavelet-based…
In the present work, the European option pricing SWIFT method is extended for Heston model calibration. The computation of the option price gradient is simplified thanks to the knowledge of the characteristic function in closed form. The…
Here we develop an option pricing method based on Legendre series expansion of the density function. The key insight, relying on the close relation of the characteristic function with the series coefficients, allows to recover the density…
Some expansion methods have been proposed for approximately pricing options which has no exact closed formula. Benhamou et al. (2010) presents the smart expansion method that directly expands the expectation value of payoff function with…
Recent work on weighted model counting has been very successfully applied to the problem of probabilistic inference in Bayesian networks. The probability distribution is encoded into a Boolean normal form and compiled to a target language,…
The goal of this paper is to investigate the method outlined by one of us (PR) in Cherubini et al. (2009) to compute option prices. We name it the SINC approach. While the COS method by Fang and Osterlee (2009) leverages the Fourier-cosine…
We provide a rigorous convergence proof demonstrating that the well-known semi-analytical Fourier cosine (COS) formula for the inverse Fourier transform of continuous probability distributions can be extended to discrete probability…
In this paper, we consider option pricing in a framework of the fractional Heston-type model with $H>1/2$. As it is impossible to obtain an explicit formula for the expectation $\mathbb E f(S_T)$ in this case, where $S_T$ is the asset price…
We present an alternative formula to price European options through cosine series expansions, under models with a known characteristic function such as the Heston stochastic volatility model. It is more robust across strikes and as fast as…
In this paper, we present new regularized Shannon sampling formulas related to the special affine Fourier transform (SAFT). These sampling formulas use localized sampling with special compactly supported window functions, namely B-spline,…
Characteristic functions of several popular classes of distributions and processes admit analytic continuation into unions of strips and open coni around $\mathbb{R}\subset \mathbb{C}$. The Fourier transform techniques reduces calculation…
The Special Affine Fourier Transformation or the SAFT generalizes a number of well known unitary transformations as well as signal processing and optics related mathematical operations. Shift-invariant spaces also play an important role in…
We introduce a multi-factor stochastic volatility model based on the CIR/Heston stochastic volatility process. In order to capture the Samuelson effect displayed by commodity futures contracts, we add expiry-dependent exponential damping…
Gradients have been exploited in proposal distributions to accelerate the convergence of Markov chain Monte Carlo algorithms on discrete distributions. However, these methods require a natural differentiable extension of the target discrete…
There is no exact closed form formula for pricing of European options with discrete cash dividends under the model where the underlying asset price follows a piecewise lognormal process with jumps at dividend ex-dates. This paper presents…
We propose a convolution-FFT method for pricing European options under the Heston model that leverages a continuously differentiable representation of the joint characteristic function. Unlike existing Fourier-based methods that rely on…
We show how spectral filters can improve the convergence of numerical schemes which use discrete Hilbert transforms based on a sinc function expansion, and thus ultimately on the fast Fourier transform. This is relevant, for example, for…
Recent works emphasized the interest of numerical solution of PDE's with wavelets. In their works, A.Cohen, W.Dahmen and R.DeVore focussed on the non linear approximation aspect of the wavelet approximation of PDE's to prove the relevance…
We present an alternative method for carrying out a principal-component analysis of Wilson coefficients in standard model effective field theory (SMEFT). The method is based on singular-value decomposition (SVD). The SVD method provides…