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In this work we detail the application of a fast convolution algorithm computing high dimensional integrals to the context of multiplicative noise stochastic processes. The algorithm provides a numerical solution to the problem of characterizing conditional probability density functions at arbitrary time, and we applied it successfully to quadratic and piecewise linear diffusion processes. The ability in reproducing statistical features of financial return time series, such as thickness of the tails and scaling properties, makes this processes appealing for option pricing. Since exact analytical results are missing, we exploit the fast convolution as a numerical method alternative to the Monte Carlo simulation both in objective and risk neutral settings. In numerical sections we document how fast convolution outperforms Monte Carlo both in velocity and efficiency terms.
We show how spectral filters can improve the convergence of numerical schemes which use discrete Hilbert transforms based on a sinc function expansion, and thus ultimately on the fast Fourier transform. This is relevant, for example, for the computat
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks prices. We con
Using a relation due to Katz linking up additive and multiplicative convolutions, we make explicit the behaviour of some Hodge invariants by middle multiplicative convolution, following [DS13] and [Mar18a] in the additive case. Moreover, the main the
In this paper we investigate price and Greeks computation of a Guaranteed Minimum Withdrawal Benefit (GMWB) Variable Annuity (VA) when both stochastic volatility and stochastic interest rate are considered together in the Heston Hull-White model. We
We propose a novel algorithm which allows to sample paths from an underlying price process in a local volatility model and to achieve a substantial variance reduction when pricing exotic options. The new algorithm relies on the construction of a disc