We develop a method for pricing financial options under uncertain volatility. The method is based on the dynamic programming principle and a Fourier cosine expansion method. Local errors in the vicinity of domain boundaries, originating from the use of Fourier series expansions, may hamper the algorithm's convergence. We use an extrapolation method to deal with these errors.
CITATION STYLE
Ruijter, M. J., & Oosterlee, C. W. (2012). The COS Method for Pricing Options Under Uncertain Volatility. In Springer Proceedings in Mathematics and Statistics (Vol. 19, pp. 95–113). Springer New York LLC. https://doi.org/10.1007/978-1-4614-3433-7_6
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