Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40187
Authors: 
Kilin, Fiodar
Year of Publication: 
2007
Series/Report no.: 
CPQF Working Paper Series 6
Abstract: 
This paper compares the performance of three methods for pricing vanilla options in models with known characteristic function: (1) Direct integration, (2) Fast Fourier Transform (FFT), (3) Fractional FFT. The most important application of this comparison is the choice of the fastest method for the calibration of stochastic volatility models, e.g. Heston, Bates, Barndorff-Nielsen-Shephard models or Levy models with stochastic time. We show that using additional cache technique makes the calibration with the direct integration method at least seven times faster than the calibration with the fractional FFT method.
Subjects: 
Stochastic Volatility Models
Calibration
Numerical Integration
Fast Fourier Transform
JEL: 
G13
Document Type: 
Working Paper

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