Pellegrino, T. andSabino, P. (2014) Pricing and Hedging Multi-Asset Spread Options using a Three-Dimensional Fourier Cosine Series Expansion Method. Journal of Energy Markets, 7, 71-92.
https://doi.org/10.21314/JEM.2014.117

has been cited by the following article:

• TITLE: A General Closed Form Approximation Pricing Formula for Basket and Multi-Asset Spread Options

  AUTHORS: Tommaso Pellegrino

  KEYWORDS: Basket Options, Spread Options, Derivatives Pricing, Characteristic Function, Fourier Inversion

  JOURNAL NAME: Journal of Mathematical Finance, Vol.6 No.5, November 30, 2016

  ABSTRACT: The aims of this paper are twofold. Firstly, we present an approximating formula for pricing basket and multi-asset spread options, which genuinely extends Caldana and Fusai’s (2013) two-asset spread options formula. Secondly, under the lognormal setting, we show that our formula becomes a Black and Scholes type formula, extending Bjerksund and Stensland’s (2011). Numerical experiments and comparison with Monte Carlo simulations and other methods available in the literature are discussed. The main contribution of this paper is to provide practitioners with a pricing formula, which can be used for pricing basket and multi-asset spread options, even under a non-Gaussian framework.