Bermudan Put Option Price

Posted by Chun-Yuan Chiu

Bermudan Put Option Price

Input:
Initial underlying asset price
Strike price
Time to maturity Years
Risk free interest rate (annulized)
Volatility (annulized)
Number of partitions
Number of grid points
Window [-c, c], c =
Output:
Option value

The calculation is based on the FFT method. The algorithm is a sequence of operations on grid functions. We take uniform grid in the interval [-c, c]. For now the number of grid points can only be a power of 2.

Tagged: FFT, Bermudan Option

 •  Apr 14, 2013  • 

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