An extension of the Euler Laplace transform inversion algorithm with applications in option pricing

We show that the Euler algorithm for Laplace transform inversion can be extended to functions defined on the entire real line, if they have specific decay features. Our objective is to apply the method to option pricing problems, specifically when inverting Laplace transforms of the option price in...

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Bibliographic Details
Published in:Operations research letters Vol. 32; no. 4; pp. 380 - 389
Main Author: Petrella, G.
Format: Journal Article
Language:English
Published: Elsevier B.V 01.07.2004
Subjects:
Euler inversion algorithm
Laplace transform
Option pricing
Euler inversion algorithm
Laplace transform
Option pricing
ISSN:0167-6377, 1872-7468
Online Access:Get full text
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Summary:We show that the Euler algorithm for Laplace transform inversion can be extended to functions defined on the entire real line, if they have specific decay features. Our objective is to apply the method to option pricing problems, specifically when inverting Laplace transforms of the option price in the logarithm of the strike.
ISSN:0167-6377
1872-7468
DOI:10.1016/j.orl.2003.06.004