دورية أكاديمية
A Fourier cosine expansion method for pricing FX-TARN under Lévy processes
| العنوان: | A Fourier cosine expansion method for pricing FX-TARN under Lévy processes |
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| المؤلفون: | Kevin Z. Tong |
| المصدر: | Quantitative Finance and Economics, Vol 7, Iss 2, Pp 261-286 (2023) |
| بيانات النشر: | AIMS Press, 2023. |
| سنة النشر: | 2023 |
| المجموعة: | LCC:Applied mathematics. Quantitative methods LCC:Finance |
| مصطلحات موضوعية: | tarn, fourier cosine expansion, lévy process, quadrature, fft, Applied mathematics. Quantitative methods, T57-57.97, Finance, HG1-9999 |
| الوصف: | In this paper, we extend the Fourier cosine expansion (COS) method to the pricing of {foreign exchange} target redemption note (FX-TARN), a popular exotic currency option. We take the FX spot rate and the cumulated positive cash flow as two state variables and factor the joint distribution by two marginals that can be approximated by Fourier cosine expansions. To recover the Fourier coefficients recursively, we approximate the two-dimensional integration by higher-order quadratures such as Gauss-Legendre or Clenshaw-Curtis quadrature for the integration over the spot rate. We derive the analytical formulas for the price under different knock-out types. We demonstrate that fast Fourier transform (FFT) can be employed to obtain the Fourier coefficients efficiently. We also evaluate the performance and accuracy of the method through a number of numerical experiments. |
| نوع الوثيقة: | article |
| وصف الملف: | electronic resource |
| اللغة: | English |
| تدمد: | 2573-0134 |
| Relation: | https://doaj.org/toc/2573-0134 |
| DOI: | 10.3934/QFE.2023014?viewType=HTML |
| DOI: | 10.3934/QFE.2023014 |
| URL الوصول: | https://doaj.org/article/71af9da56ce548a19dc6a9aaab537223 |
| رقم الأكسشن: | edsdoj.71af9da56ce548a19dc6a9aaab537223 |
| قاعدة البيانات: | Directory of Open Access Journals |
Full Text Finder | تدمد: | 25730134 |
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| DOI: | 10.3934/QFE.2023014?viewType=HTML |