Ultra-Fast Pricing Barrier Options and CDSs

21 Pages Posted: 14 Jan 2016

Date Written: January 10, 2016

Abstract

We construct a new approximate method for pricing barrier options and CDSs. In many cases, prices of barrier options and CDSs of maturities one year and more, at the log-distance 0.1 from the barrier and farther, for 8 spots, can be calculated adding up 4-16 fairly simple terms, with relative errors of order 5 E-05 and smaller, in 4-12 msc.

Keywords: Spectrally one-sided Levy processes, Wiener-Hopf factorization, barrier options, credit default swaps, Laplace transform, parabolic inverse Laplace transform

JEL Classification: G12

Suggested Citation

Levendorskii, Sergei Z., Ultra-Fast Pricing Barrier Options and CDSs (January 10, 2016). Available at SSRN: https://ssrn.com/abstract=2713497 or http://dx.doi.org/10.2139/ssrn.2713497

Sergei Z. Levendorskii (Contact Author)

Calico Science Consulting ( email )

Austin, TX
United States

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