Monthly Archives: July 2016

Optimal contours and controls in semi-analytical option pricing

For models that have an analytically available characteristic function, Fourier inversion is an important computational method for a fast and accurate calculation of plain vanilla option prices. In order to improve the numerical stability of the Fourier inversion, Lord and Kahl [2007] suggested a method to find an optimal contour of integration, taking into account numerical issues such as cancellation…