OPTION VALUATION BY USING FAST FOURIER TRANSFORM (FFT) TECHNIQUES WITH VARIANSI GAMMA(VG)

Rajab, Fitriani ( Jurusan Matematika FST-UIN Alauddin)

Jurnal Matematika dan Statistika serta Aplikasinya (Jurnal MSA)
Vol 2, No 2 (2014)

Fourier transform Techniques have important role in Financial Mathematics. Fast Fourier Transformation (FFT) is a technique Fourier transform with high accuracy and more efficient by using characteristic function than density function itself. FFT is used to option valuation under Lévy processes. This journal described Fourier transfor with its properties and Lévy processes. The section Lévy processes, we present a list of Lévy processes commonly used in financial applications together with their characteristic functions. FFT Algorithms is computed by using characteristic function of Variance Gamma (VG) with parameter 𝜎, 𝑣, 𝜃). At the end, we simulated computing Eropa call option value with FFT technique using VG by Carr and Madan’s approach.