Dufresne, Daniel and Garrido, José and Morales, Manuel (2006) Fourier Inversion Formulas in Option Pricing and Insurance. Technical Report. Concordia University. Department of Mathematics & Statistics, Montreal, Quebec.
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Several authors have used Fourier inversion to compute prices of puts and calls, some using Parseval’s theorem. The expected value of max (S − K, 0) also arises in excess-of-loss or stop-loss insurance, and we show that Fourier methods may be used to compute them. In this paper, we take the idea of using Parseval’s theorem further: (1) formulas requiring weaker assumptions; (2) relationship with classical inversion theorems for probability distributions; (3) formulas for payoffs which occur in insurance. Numerical examples are provided.
|Divisions:||Concordia University > Faculty of Arts and Science > Mathematics and Statistics|
|Item Type:||Monograph (Technical Report)|
|Authors:||Dufresne, Daniel and Garrido, José and Morales, Manuel|
|Series Name:||Department of Mathematics & Statistics. Technical Report No. 6/06|
|Corporate Authors:||Concordia University. Department of Mathematics & Statistics|
|Deposited By:||DIANE MICHAUD|
|Deposited On:||03 Jun 2010 16:44|
|Last Modified:||08 Dec 2010 18:21|
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