Abstract
Pricing of derivatives is one of the central problems in computational finance. Since the theory of derivative pricing is highly mathematical, numerical techniques such as lattice approach, finite-difference and finite-element among others have been employed. Recently fast Fourier transform (FFT) has been employed for derivative pricing in sequential computers. In this paper, we report development of a multithreaded FFT pricing algorithm and performance evaluation on a multithreaded platform. The focus of this study is on the effectiveness of using a parallel computer for financial problems and performance evaluation of a multithreaded algorithm for finance applications such as derivative pricing. In general, a parallel algorithm for FFT, with blocked data distribution of N elements on P processors, involves communication for log P iterations and terminates after log N iterations. The first (log N − log P) iterations therefore, require no communication and a sequential algorithm can be used in each processor. We call this a local algorithm. At the end of the (log N − log P) iterations, the processors switch to a multithreaded algorithm where sending and receiving of threads is through message passing. We call this a remote algorithm. The algorithm has been implemented on the EARTH (Efficient Architecture for Running THreads) multithreaded platform. Our results indicate that the FFT multithreaded algorithm for option pricing is very efficient giving a relative speedup of 50% on 64 processors. This study reveals an important commercial application for High Performance Computing.
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Thulasiram, R.K., Thulasiraman, P. Performance Evaluation of a Multithreaded Fast Fourier Transform Algorithm for Derivative Pricing. The Journal of Supercomputing 26, 43–58 (2003). https://doi.org/10.1023/A:1024464001273
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DOI: https://doi.org/10.1023/A:1024464001273