  This paper examines the problem of pricing spread options under some models
with jumps driven by Compound Poisson Processes and stochastic volatilities in
the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic
function for two market models featuring joint normally distributed jumps,
stochastic volatility, and different stochastic dependence structures. With the
use of Fast Fourier Transform(FFT) we accurately compute spread option prices
across a variety of strikes and initial price vectors at a very low
computational cost when compared to Monte Carlo pricing methods. We also look
at the sensitivities of the prices to the model specifications and find strong
dependence on the selection of the jump and stochastic volatility parameters.
Our numerical implementation is based on the method developed by Hurd and Zhou
(2009).
