Multi-asset option pricing using a parallel Fourier-based technique

Abstract

In this paper we present and evaluate a Fourier-based sparse grid method for pricing multi-asset options. This involves computing multidimensional integrals efficiently and we do it by the Fast Fourier Transform. We also propose and evaluate ways to deal with the curse of dimensionality by means of parallel partitioning of the Fourier transform and by incorporating a parallel sparse grids method. Finally, we test the presented method by solving pricing equations for options dependent on up to seven underlying assets.