Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model

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dc.contributor.advisorBecker, Ronalden_ZA
dc.contributor.authorMoir, Richarden_ZA
dc.date.accessioned2014-10-17T10:09:45Z
dc.date.available2014-10-17T10:09:45Z
dc.date.issued2014en_ZA
dc.descriptionIncludes bibliographical references.en_ZA
dc.description.abstractWe focus on the pricing of Bermudan and barrier options under the dynamics of the Heston stochastic volatility model. The two-dimensional nature of the Heston model makes the pricing of these options problematic, as the risk-neutral expectations need to be calculated at each exercise/observation date along a continuum of the two state spaces. We examine the 2D-COS method, which makes use of Fourier-cosine expansions in each of the two dimensions in order to approximate the integrals. Using the fast Fourier transform, we are able to efficiently calculate the cosine series coefficients at each exercise/observation date. A construction of this method is provided and we conduct numerical experiments to evaluate its speed and accuracy.en_ZA
dc.identifier.apacitationMoir, R. (2014). <i>Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science. Retrieved from http://hdl.handle.net/11427/8520en_ZA
dc.identifier.chicagocitationMoir, Richard. <i>"Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2014. http://hdl.handle.net/11427/8520en_ZA
dc.identifier.citationMoir, R. 2014. Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Moir, Richard AB - We focus on the pricing of Bermudan and barrier options under the dynamics of the Heston stochastic volatility model. The two-dimensional nature of the Heston model makes the pricing of these options problematic, as the risk-neutral expectations need to be calculated at each exercise/observation date along a continuum of the two state spaces. We examine the 2D-COS method, which makes use of Fourier-cosine expansions in each of the two dimensions in order to approximate the integrals. Using the fast Fourier transform, we are able to efficiently calculate the cosine series coefficients at each exercise/observation date. A construction of this method is provided and we conduct numerical experiments to evaluate its speed and accuracy. DA - 2014 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2014 T1 - Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model TI - Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model UR - http://hdl.handle.net/11427/8520 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/8520
dc.identifier.vancouvercitationMoir R. Two dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Model. [Thesis]. University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2014 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/8520en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDivision of Actuarial Scienceen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.titleTwo dimensional COS method for pricing early-exercise and discrete barrier options under the Heston Modelen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMPhilen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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