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TFM-CAF_Tubella+Ortiz_2024.pdf (710.53 KB)

Document type

Master thesis

Publication date

2024

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cc-by-nc-nd (c) Tubella Domingo, 2024
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/215139

The COS method for pricing European options

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Abstract

The COS method exploits the relation between the characteristic function of a random variable and the series coefficients of the Fourier-cosine expansion of the density function. After the mathematical introduction and the derivation of the Black-Scholes formula, we introduce with all the details the COS method. We compare, in terms of absolute error and in CPU time, its performance when pricing European options with a Monte Carlo scheme and with the Black-Scholes value of the derivative. An error analysis of COS method is also provided. Numerical experiments confirm the fast convergence and the precision of the COS method.

Description

Treballs Finals del Màster de Ciències Actuarials i Financeres, Facultat d'Economia i Empresa, Universitat de Barcelona, Curs: 2023-2024, Tutor: Luis Ortiz Gracia

Subject

Opcions (Finances), Mètode de Montecarlo, Treballs de fi de màster

Subject (English)

Options (Finance), Monte Carlo method, Master's thesis

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Màster Oficial - Ciències Actuarials i Financeres (CAF)

Citation

TUBELLA DOMINGO, Oriol. The COS method for pricing European options. [consulted: 11 of August of 2026]. Available at: https://hdl.handle.net/2445/215139

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