dorsal/arxiv
View SchemaPricing options with VG model using FFT
| Authors | Andrey Itkin |
|---|---|
| Categories | |
| ArXiv ID | physics/0503137 |
| URL | https://arxiv.org/abs/physics/0503137 |
| License | http://arxiv.org/licenses/nonexclusive-distrib/1.0/ |
Abstract
We discuss various analytic and numerical methods that have been used to get option prices within a framework of the VG model. We show that some popular methods, for instance, Carr-Madan's FFT method could blow up for certain values of the model parameters even for an European vanilla option. Alternative methods - one originally proposed by Lewis, and Black-Scholes-wise method are considered that seem to work fine for any value of the VG parameters. Test examples are given to demonstrate efficiency of these methods. Convergency of all methods is also discussed.}
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"date_created": "2026-03-02T18:00:57.283000Z",
"date_modified": "2026-03-02T18:00:57.283000Z",
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"abstract": "We discuss various analytic and numerical methods that have been used to get\noption prices within a framework of the VG model. We show that some popular\nmethods, for instance, Carr-Madan\u0027s FFT method could blow up for certain values\nof the model parameters even for an European vanilla option. Alternative\nmethods - one originally proposed by Lewis, and Black-Scholes-wise method are\nconsidered that seem to work fine for any value of the VG parameters. Test\nexamples are given to demonstrate efficiency of these methods. Convergency of\nall methods is also discussed.}",
"arxiv_id": "physics/0503137",
"authors": [
"Andrey Itkin"
],
"categories": [
"physics.soc-ph",
"q-fin.PR"
],
"license": "http://arxiv.org/licenses/nonexclusive-distrib/1.0/",
"title": "Pricing options with VG model using FFT",
"url": "https://arxiv.org/abs/physics/0503137"
},
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