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What is FFT Method for Spread Option Pricing about?

This document introduces a new Fourier transform method for pricing spread options based on the characteristic function of the underlying assets. The key contributions are: 1) It derives a Fourier representation of the basic spread option payoff function. 2) It shows how to compute spread option prices and Greeks by combining this Fourier representation with the characteristic function of the asset returns in a manner similar to Carr and Madan

Author

Rodrigo Martins

Language

EN