IDEAS home Printed from https://ideas.repec.org/a/wsi/ijfexx/v02y2015i02ns242478631550019x.html
   My bibliography  Save this article

An accumulator pricing method based on Fourier cosine series expansions

Author

Listed:
  • Deng Ding

    (Department of Mathematics, University of Macau, Macao, China)

  • Wenfei Wang

    (Department of Mathematics, University of Macau, Macao, China)

Abstract

Accumulator is a highly path dependant derivative structure, whose underlying assets can be currency rate, stock price, power source and so on. This paper studies the accumulator pricing problems under different setting of the contract. First, we review pricing an accumulator in which the barrier is applied continuously. Second, without analytical formulae, the price of an accumulator with barrier applied discretely has to be determined by approximation or numerical methods. The Fourier cosine expansions method, initiated by Fang and Oosterlee [SIAM Journal on Scientific Computing, 31(2), 826–848], is applied to present a numerical method to solve it. The numerical results, compared with Barrier Correction method and Monte Carlo simulation method, are given to show the efficiency of the presented method. The last part gives a financial analysis about the risk hidden in an accumulator.

Suggested Citation

  • Deng Ding & Wenfei Wang, 2015. "An accumulator pricing method based on Fourier cosine series expansions," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-16.
    • Handle: RePEc:wsi:ijfexx:v:02:y:2015:i:02:n:s242478631550019x
    DOI: 10.1142/S242478631550019X
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S242478631550019X
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S242478631550019X?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijfexx:v:02:y:2015:i:02:n:s242478631550019x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/worldscinet/ijfe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.