Highly efficient Shannon wavelet-based pricing of power options under the double exponential jump framework with stochastic jump intensity and volatility

We propose a highly efficient and accurate valuation method for exotic-style options based on the novel Shannon wavelet inverse Fourier technique (SWIFT). Specifically, we derive an pricing power under more realistic double exponential jump model with stochastic volatility intensity. The inclusion of such innovations may accommodate various stylised facts observed in prices financial assets, admits framework as result. Following derivation our SWIFT options, perform extensive numerical experiments to analyse both method’s accuracy efficiency. In addition, investigate sensitivities resulting prices, well inherent errors, changes underlying market conditions. Our results demonstrate that is not only when benchmarked its closest competitors, Fourier-cosine (COS) widely-acclaimed fast-Fourier transform (FFT) methods, but it also robust across range different conditions exhibiting error convergence.