International Journal of
Physical Sciences

  • Abbreviation: Int. J. Phys. Sci.
  • Language: English
  • ISSN: 1992-1950
  • DOI: 10.5897/IJPS
  • Start Year: 2006
  • Published Articles: 2557

Full Length Research Paper

Fast Fourier transform technique for the European option pricing with double jumps

Sumei Zhang1,2* and Lihe Wang3        
1School of Science, Xi'an Jiaotong University, Xi'an 710049, China. 2School of Science, Xi’an University of Post and Telecommunications, Xi’an 710121, China. 3Department of Mathematics, University of Iowa, Iowa City, IA 52242, USA.
Email: [email protected]

  •  Accepted: 13 December 2011
  •  Published: 09 January 2012


In this paper, we provided a fast algorithm for pricing European options under a double exponential jump-diffusion model based on Fourier transform. We derived a closed-form (CF) representation of the characteristic function of the model. By using fast Fourier transform (FFT) technique, we obtained an approximation numerical solution for the prices of European call options. Our numerical results show that our method is fast, accurate and easy to implement. The proposed option pricing method is useful for empirical analysis of asset returns and managing the corporate credit risks.


Key words: Fast Fourier transforms, characteristic function, double exponential jump diffusion, option pricing.