SINH-acceleration for B-spline projection with Option Pricing Applications

TL;DR

This paper enhances B-spline projection methods for option pricing by integrating sinh-acceleration, leading to improved efficiency and accuracy in Fourier-based approaches, especially for European and barrier options.

Contribution

It introduces sinh-acceleration into B-spline projection, improving error control and reducing CPU time in Fourier-based option pricing methods.

Findings

Enhanced B-spline method with sinh-acceleration improves efficiency.

Method achieves better error separation than FFT-based approaches.

Numerical experiments confirm robustness and accuracy for various options.

Abstract

We clarify the relations among different Fourier-based approaches to option pricing, and improve the B-spline probability density projection method using the sinh-acceleration technique. This allows us to efficiently separate the control of different sources of errors better than the FFT-based realization allows; in many cases, the CPU time decreases as well. We demonstrate the improvement of the B-spline projection method through several numerical experiments in option pricing, including European and barrier options, where the SINH acceleration technique proves to be robust and accurate.