Quantitative Research Paper
Option Pricing via Fourier methods
Summary
This paper explores how Fourier transforms and characteristic functions can be used to price options efficiently, especially in models where closed-form densities are unavailable. It covers the mathematical intuition behind the approach, its connection to risk-neutral pricing, and surveys major methods including Heston inversion, Carr–Madan FFT, Lewis, FRFT, CONV, and COS. A key takeaway is that, in many realistic models, the probability density is difficult to handle directly, while the characteristic function remains tractable - making Fourier methods one of the most powerful tools in modern quantitative finance.
Authors
- Ianina TarcaHead of Quantitative Research
- Afonso Tavares da SilvaQuantitative Research Analyst
Details
- Published
- 27 April 2026
- Division
- Quantitative Research
- Type
- Quantitative Research Paper
- Pages
- 10
- Authors
- 2
Cite this report
Minerva Investment Management Society (2026). Option Pricing via Fourier methods. Quantitative Research. https://minervaims.org/archive/option-pricing-via-fourier-methods-2026
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