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1 MATHFI - Financial mathematics Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12

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.

Keywords : Lévy processes barrier options regime switching models Wiener-Hopf factorization Laplace transform numerical methods numerical transform inversion

Author: Oleg Kudryavtsev -

Source: https://hal.archives-ouvertes.fr/


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