Liming Feng - UIUC

4:00 pm on Thursday, March 6, 2014
5:00 pm on Thursday, March 6, 2014
MCS 148
Title: Hilbert Transform and Options Valuation. Abstract: Transform methods have been widely used for options valuation in models with explicit characteristic functions. We explore the analyticity of the characteristic functions and propose Hilbert transform based schemes for the valuation of European, American and path dependent options and Monte Carlo simulation from analytic characteristic functions. The schemes are based on sinc expansions of functions analytic in a horizontal strip in the complex plane. They are very easy to implement. Despite the simplicity, they are very accurate with exponentially decaying errors. Numerical examples illustrate the effectiveness of these schemes.