A Novel Pricing Method for European Options Based on Fourier-Cosine Series Expansions
A Novel Pricing Method for European Options Based on Fourier-Cosine Series Expansions
Here we develop an option pricing method for European options based on the Fourier-cosine series and call it the COS method. The key insight is in the close relation of the characteristic function with the series coefficients of the Fourier-cosine expansion of the density function. In most cases, the convergence …