Efficient Rainbow Options Pricing Methods Based on Two-Dimensional Fourier Series Expansions

Abstract

An efficient option pricing method based on two dimensional Fourier series expansions was proposed by Ruijter and Oosterlee in 2012, recently, this method was extended to modified two dimensional Fourier series expansions by Meng and Ding. In this paper, these methods are applied to deduce efficient pricing formulae for two bivariate assets rainbow options, so called as put-on-mini- mum and call-on-maximum. A series of numerical experiments for such options pricing is presen- ted to compare these methods, and some conclusions are then given based on those numerical results.