COS-TT-CHF: A Tensor-Train Characteristic-Function COS Method for Multi-Asset Option Pricing

Abstract

This paper considers European multi-asset option pricing under Lévy and affine characteristic-function models. The main obstruction is the curse of dimensionality: direct multidimensional COS pricing forms tensor-product coefficient arrays whose size grows exponentially with the number of assets. We study and extend COS-TT-CHF, a low-rank construction that uses TT-cross to compress sampled characteristic-function tensors into tensor-train COS coefficients for arithmetic basket and min/max option pricing. Once built, the compressed representation gives fast post-setup strike-grid and selected component Delta/Vega calculations. The numerical study compares with adaptive-quadrature Fourier benchmarks, direct COS, a tensor-Fourier min-option benchmark, and quasi-Monte Carlo (QMC) references based on randomized Sobol points. The reported timings show a low-dimensional crossover against direct COS as the benchmark moves from $d=2$ to $d=4$, favorable timings against the tensor-Fourier min-option benchmark from $d=3$ onward, and favorable timings against the QMC common-Heston reference already at $d=2$. The reported tests reach $d=30$ for GBM and $d=20$ for VG, NIG, and common-Heston benchmark families, with accuracy, rank, runtime, control-sensitivity, and component Delta/Vega diagnostics reported throughout.

35 pages, 3 figures, 17 tables