This paper proposes and develops a novel, simple, widely applicable numerical approach for option pricing based on quadrature methods. Though in some ways similar to lattice or finite-difference schemes, it possesses exceptional accuracy and speed. Discretely monitored options are valued with only one timestep between observations, and nodes can be perfectly placed in relation to discontinuities. Convergence is improved greatly; in the extrapolated scheme, a doubling of points can reduce error by a factor of 256. Complex problems (e.g., fixed-strike lookback discrete barrier options) can be evaluated accurately and orders of magnitude faster than by existing methods.
Andricopoulos, A. D., Widdicks, M., Duck, P. W., & Newton, D. (2003). Universal Option Variation Using Quadrature Methods. Journal of Financial Economics, 67(3), 447-471. https://doi.org/10.1016/S0304-405X(02)00257-X