Ultra-Fast Pricing Barrier Options and CDSs
21 Pages Posted: 14 Jan 2016
Date Written: January 10, 2016
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: Suggested Citation