{"title":"An efficient pricing algorithm for swing options based on fourier cosine expansions","authors":"Baocheng Zhang, C. Oosterlee","doi":"10.21314/JCF.2013.268","DOIUrl":null,"url":null,"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 Levy process.","PeriodicalId":266346,"journal":{"name":"Reports of the Department of Applied Mathematical Analysis","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2010-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"24","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Reports of the Department of Applied Mathematical Analysis","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.21314/JCF.2013.268","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 24
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 Levy process.