A fast Fourier algorithm for Asian option pricing under Black-Scholes model
This paper focused on the geometric average Asian options and utilizes the fast Fourier transform method to obtain an expression containing the characteristic function,thereby solving for the Asian options more rapidly.A Fourier transform was applied to the option price in order to derive an expression that can be represented by the characteristic function of the logarithm of the underlying asset price.This results in an expression with the characteristic function that can output the option price.Handling this expression requires discretization before employing the fast Fourier transform to solve it and output the result.The expression for pricing geometric Asian options under the Black-Scholes model was calculated,yielding the characteristic function of its option pricing model,which can then be used to quickly determine the corresponding option value.By comparing the value of geometric average Asian options solved using this method under the Black-Scholes model with the original option value data from the Black-Scholes model,the effectiveness and efficiency of this method were validated.
option pricingAsian optionsdiscrete fast Fourier transformcharacteristic functionBlack-ScholesFourier transform
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