Abstract
The cosine willow tree method (Ma et al., 2021) provides a first lattice framework to price options and calculate risk measures under various Lévy process models. However, it may fail under some circumstances due to the failure in moment matching by the Johnson curve. In this paper, we propose a more robust approach to construct a willow tree via numerical integration. Since the moment matching by the Johnson curve is avoided, the new approach provides a better convergence than the cosine willow tree method. Finally, numerical experiments are carried out to support our claims.
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