Efficient pricing of European options on two underlying assets by frame duality (Q2304872)

The authors consider the option pricing method of density projection (onto B-splines) by frame duality, previously applied to pricing European options on one underlying asset, and extend it to higher dimensions, especially two-dimensions in which some exotic options can be priced. The technique does not require an a-priori truncation of the integration range, and exhibits excellent performance compared with other state-of-the-art methods, particularly for fatter-tailed short maturity models. Numerical results on implementation of this method to price for popular two-assets options, under both the geometric Brownian motion and variance-gamma dynamics, demonstrate remarkable accuracy and robustness.