Modular Pricing of Options An Application of Fourier Analysis
From a technical point of view, the celebrated Black and Scholes option pricing formula was originally developed using a separation of variables technique. However, already Merton mentioned in his seminal 1973 pa per, that it could have been developed by
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Jianwei Zhu
Modular Pricing of Options An Application of Fourier Analysis
Springer
Author Dr. Jianwei Zhu Ebcrhard-Karls-Universitlit Ttibingen Wirtschaftswissenschaftliche Fakultlit Mohlstrasse 36 72074 Ttibingen, Germany
Cataloging-in-Publication data applied for Die Deutsche Bibliothek - CIP-Einheitsaufnahrne Zhu, Jianwei: Modular pricing of options : an application of Fourier analysis I Jianwei Zhu. (Lecture notes in economics and mathematical systems ; 493) ISBN 978-3-540-67916-5 ISBN 978-3-662-04309-7 (eBook) DOI 10.1007/978-3-662-04309-7
ISSN 0075-8442 ISBN 978-3-540-67916-5 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, re-use of illustrations, recitation, broadcasting, reproduction on microfilms or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag Berlin Heidelberg GmbH. Violations are liable for prosecution under the German Copyright Law. ©Springer-Verlag Berlin Heidelberg 2000 Originally published by Springer-Verlag Berlin Heidelberg New York in 2000
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Foreword From a technical point of view, the celebrated Black and Scholes option pricing formula was originally developed using a separation of variables technique. However, already Merton mentioned in his seminal 1973 paper, that it could have been developed by using Fourier transforms as well. Indeed, as is well known nowadays, Fourier transforms are a rather convenient solution technique for many models involving the fundamental partial differential equation of financial economics. It took the community nearly another twenty years to recognize that Fourier transform is even more useful, if one applies it to problems in financial eco
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