Journal of Computational Finance

Risk.net

Multi-asset option pricing using a parallel Fourier-based technique

C. C. W. Leentvaar, C. W. Oosterlee

ABSTRACT

In this paper we present and evaluate a Fourier-based sparse grid method for pricing multi-asset options. This involves computing multi-dimensional integrals efficiently and we accomplish it using the fast Fourier transform. We also propose and evaluate ways to deal with the curse of dimensionality by means of parallel partitioning of the Fourier transform and by incorporating a parallel sparse grid method. Finally, we test the presented method by solving equations for options that are dependent on up to seven underlying assets.

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