An efficient pricing algorithm for swing options based on fourier cosine expansions

Title

An efficient pricing algorithm for swing options based on fourier cosine expansions

 Author

Zhang, B.
Oosterlee, C.W.

Faculty

Electrical Engineering, Mathematics and Computer Science

 Date

2010-02-04

 Abstract

Swing options give contract holders the right to modify amounts of future delivery of certain commodities, such as electricity or gas. In this paper, we assume that these options can be exercised at any time before the end of the contract, and more than once. However, a recovery time between any two consecutive exercise dates is incorporated as a constraint to avoid continuous exercise. We introduce an efficient way of pricing these swing options, based on the Fourier cosine expansion method, which is especially suitable when the underlying is modeled by a Lévy process.

 To reference this document use:

http://resolver.tudelft.nl/uuid:46714bc8-783c-4535-b222-ba1f89b5ea96

 Publisher

Delft University of Technology, Faculty of Electrical Engineering, Mathematics and Computer Science, Delft Institute of Applied Mathematics

 ISSN

1389-6520

 Source

Reports of the Department of Applied Mathematical Analysis, 10-04

 Part of collection

Institutional Repository

 Document type

report

 Rights

(c)2010 Zhang, B., Oosterlee, C.W.
Files
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