Implementation of numerical Fourier method for second order Taylor schemes

The problem of pricing contingent claims in a complete market has received a significant amount of attention in literature since the seminal work of Black, Fischer and Scholes, Myron (1973). It was also in 1973 that the theory of backward stochastic differential equations (BSDEs) was developed by Bismut, Jean-Michel (1973), but it was much later in the literature that BSDEs developed links to contingent claim pricing. This dissertation is a thorough exposition of the survey paper Ruijter, Marjon J and Oosterlee, Cornelis W (2016) in which a highly accurate and efficient Fourier pricing technique compatible with BSDEs is developed and implemented. We prove our understanding of this technique by reproducing some of the numerical experiments and results in Ruijter, Marjon J and Oosterlee, Cornelis W (2016), and outlining some key implementationl considerations.

Grantor

African Institute of Financial Markets and Risk Management

Year dc:date.issued

2019

Author dc:creator

• Mashalaba, Qaphela

Advisor dc:contributor.advisor

• McWalter, Thomas

• Mathematical Finance

Handle dc:identifier.uri

http://hdl.handle.net/11427/30978

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/30978