Pricing Asian Options for Jump Diffusions
Computational Engineering, Finance, and Science
2008-10-29 v7
Abstract
We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence solves a parabolic partial differen- tial equation (not an integro-differential equation). As a result we obtain a fast numerical approximation scheme whose accuracy versus speed characteristics can be controlled. We analyze the performance of our numerical algorithm on several examples.
Cite
@article{arxiv.0707.2432,
title = {Pricing Asian Options for Jump Diffusions},
author = {Erhan Bayraktar and Hao Xing},
journal= {arXiv preprint arXiv:0707.2432},
year = {2008}
}
Comments
Key Words: Pricing Asian Options, Jump diffusions, an Iterative Numerical Scheme, Classical Solutions of Integro-PDEs