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An Accurate FFT-Based Algorithm for Bermudan Barrier Option Pricing

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Author(s): Deng Ding | Zuoqiu Weng | Jingya Zhao

Journal: Intelligent Information Management
ISSN 2160-5912

Volume: 04;
Issue: 03;
Start page: 89;
Date: 2012;
Original page

Keywords: Fast Fourier Transform (FFT) | Bermudan Barrier Option | CONV Method.

ABSTRACT
An efficient and accurate numerical method, which is called the CONV method, was proposed by Lord et al in [1] to price Bermudan options. In this paper, this method is applied to price Bermudan barrier options in which the monitored dates may be many times more than the exercise dates. The corresponding algorithm is presented to practical option pricing. Numerical experiments show that this algorithm works very well for different exponential Lévy asset models.
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