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Reports (Research Report) Year : 2010

Efficient pricing options under regime switching

Oleg Kudryavtsev
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Abstract

In the paper, we propose two new efficient methods for pricing barrier option in wide classes of Lévy processes with/without regime switching. Both methods are based on the numerical Laplace transform inversion formulae and the Fast Wiener-Hopf factorization method developed in Kudryavtsev and Levendorski\v{i} (Finance Stoch. 13: 531--562, 2009). The first method uses the Gaver-Stehfest algorithm, the second one -- the Post-Widder formula. We prove the advantage of the new methods in terms of accuracy and convergence by using Monte-Carlo simulations.
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Dates and versions

inria-00450291 , version 1 (26-01-2010)

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  • HAL Id : inria-00450291 , version 1

Cite

Oleg Kudryavtsev. Efficient pricing options under regime switching. [Research Report] RR-7184, INRIA. 2010, pp.35. ⟨inria-00450291⟩
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