International records / OpenAlex research

Fast Fourier Transform Based Computation of American Options under Economic Recession Induced Volatility Uncertainty

The menace of Economic recession to uncertainty in the payoff of investments and standard of living cannot be over emphasized. This paper presents fast Fourier transform method for the valuation of American style options under the exposure of Economic recession. A multi-factor affine Exponential jump model with Recession induced Stochastic volatility and Intensity, which is a partial Integro-Differential Equation (PIDE) is presented. We show how to determine the characteristic function of the model via generating function. A close form characteristic formula for a financial claim satisfying th…