In this paper, the evaluation of discretely sampled Asian options was considered by numerically solving the associated partial differential equations with the Legendre spectral method. Double average options were disc...In this paper, the evaluation of discretely sampled Asian options was considered by numerically solving the associated partial differential equations with the Legendre spectral method. Double average options were discussed as examples. The problem is a parabolic one on a finite domain whose equation degenerates into ordinary differential equations on the boundaries. A fully discrete scheme was established by using the Legendre spectral method in space and the Crank-Nicolson finite difference scheme in time. The stability and convergence of the scheme were analyzed. Numerical results show that the method can keep the spectral accuracy in space for such degenerate problems.展开更多
In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equat...In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equation(PDE).The call-put parity for the geometric average Asian options is given.The results are generalization of option pricing under standard Brownian motion.展开更多
The pricing of moving window Asian option with an early exercise feature is considered a challenging problem in option pricing. The computational challenge lies in the unknown optimal exercise strategy and in the high...The pricing of moving window Asian option with an early exercise feature is considered a challenging problem in option pricing. The computational challenge lies in the unknown optimal exercise strategy and in the high dimensionality required for approximating the early exercise boundary. We use sparse grid basis functions in the Least Squares Monte Carlo approach to solve this “curse of dimensionality” problem. The resulting algorithm provides a general and convergent method for pricing moving window Asian options. The sparse grid technique presented in this paper can be generalized to pricing other high-dimensional, early-exercisable derivatives.展开更多
This paper is concerned with the pricing problem of the discrete arithmetic average Asian call option while the discrete dividends follow geometric Brownian motion. The volatility of the dividends model depends on the...This paper is concerned with the pricing problem of the discrete arithmetic average Asian call option while the discrete dividends follow geometric Brownian motion. The volatility of the dividends model depends on the Markov-Modulated process. The binomial tree method, in which a more accurate factor has been used, is applied to solve the corresponding pricing problem. Finally, a numerical example with simulations is presented to demonstrate the effectiveness of the proposed method.展开更多
An efficient binomial lattice for pricing Asian options on yields is established under the affine term structure model. In order to reconnect the path of the discrete lattice,the technique of D. Nelson and K. Ramaswam...An efficient binomial lattice for pricing Asian options on yields is established under the affine term structure model. In order to reconnect the path of the discrete lattice,the technique of D. Nelson and K. Ramaswamy is used to transform a stochastic interest rate process into a stochastic diffusion with unit volatility. By the binomial lattice and linear interpolation,the prices of Asian options on yields can be obtained. As the number of nodes in the tree structure grows linearly with the number of time steps, the computational speed is improved. The numerical experiments to verify the validity of the lattice are also provided.展开更多
This paper studies the convergence rates of a moving mesh implicit finite difference method with interpolation for partial differential equations （PDEs） with moving boundary arising in Asian option pricing. The movi...This paper studies the convergence rates of a moving mesh implicit finite difference method with interpolation for partial differential equations （PDEs） with moving boundary arising in Asian option pricing. The moving mesh scheme is based on Rnnacher timestepping approach whose idea is running the implicit Euler schemes in the initial few steps and continuing with Crank-Nicolson schemes. With graded meshes for time direction and moving meshes for space direction, the fully discretized scheme is constructed using quadratic interpolation between two consecutive time level for the PDEs with moving boundary. The second-order convergence rates in both time and space are proved and numerical examples are carried out to confirm the theoretical results.展开更多
In this paper, we derive two general parameterized boundaries of finite difference scheme for VeSe~＇s PDE which is used to price both fixed and floating strike Asian options. Using these two boundaries, we can deal w...In this paper, we derive two general parameterized boundaries of finite difference scheme for VeSe~＇s PDE which is used to price both fixed and floating strike Asian options. Using these two boundaries, we can deal with all kinds of situations, especially, some extreme cases, like overhigh volatility, very small volatility, etc, under which the Asian option is usually mispriced in many existing numerical methods. Numerical results show that our boundaries are pretty efficient.展开更多
This paper presents simple and fast algorithms for computing very tight upper and lower bounds on the prices of American Asian options in the binomial model.The authors choose two types sets of the actual arithmetic a...This paper presents simple and fast algorithms for computing very tight upper and lower bounds on the prices of American Asian options in the binomial model.The authors choose two types sets of the actual arithmetic average prices,instead of the simulated values in other existing models,as the representative average prices at each node of the binomial tree.This approach simplifies effectively the computation and reduces the error caused by the linear interpolation.Numerical results show that the approach produces accurate upper and lower bounds compared to the other existing methods based on the binomial tree.展开更多
In this paper, we use a modified path simulation method for valuation of Asian American Options. This method is a modification of the path simulation model proposed by Tiley. We assume that the behavior of the log ret...In this paper, we use a modified path simulation method for valuation of Asian American Options. This method is a modification of the path simulation model proposed by Tiley. We assume that the behavior of the log return of the underlying assets follows the Variance Gamma (VG) process, since its distribution is heavy tail and leptokurtic. We provide sensitivity analysis of this method and compare the obtained prices to Asian European option prices.展开更多
文摘In this paper, the evaluation of discretely sampled Asian options was considered by numerically solving the associated partial differential equations with the Legendre spectral method. Double average options were discussed as examples. The problem is a parabolic one on a finite domain whose equation degenerates into ordinary differential equations on the boundaries. A fully discrete scheme was established by using the Legendre spectral method in space and the Crank-Nicolson finite difference scheme in time. The stability and convergence of the scheme were analyzed. Numerical results show that the method can keep the spectral accuracy in space for such degenerate problems.
基金Shanghai Leading Academic Discipline Project,China(No.S30405)Special Funds for Major Specialties of Shanghai Education Committee,China
文摘In this paper,the pricing formulae of the geometric average Asian call option with the fixed and floating strike price under the fractional Brownian motion(FBM)are given out by the method of partial differential equation(PDE).The call-put parity for the geometric average Asian options is given.The results are generalization of option pricing under standard Brownian motion.
文摘The pricing of moving window Asian option with an early exercise feature is considered a challenging problem in option pricing. The computational challenge lies in the unknown optimal exercise strategy and in the high dimensionality required for approximating the early exercise boundary. We use sparse grid basis functions in the Least Squares Monte Carlo approach to solve this “curse of dimensionality” problem. The resulting algorithm provides a general and convergent method for pricing moving window Asian options. The sparse grid technique presented in this paper can be generalized to pricing other high-dimensional, early-exercisable derivatives.
文摘This paper is concerned with the pricing problem of the discrete arithmetic average Asian call option while the discrete dividends follow geometric Brownian motion. The volatility of the dividends model depends on the Markov-Modulated process. The binomial tree method, in which a more accurate factor has been used, is applied to solve the corresponding pricing problem. Finally, a numerical example with simulations is presented to demonstrate the effectiveness of the proposed method.
文摘An efficient binomial lattice for pricing Asian options on yields is established under the affine term structure model. In order to reconnect the path of the discrete lattice,the technique of D. Nelson and K. Ramaswamy is used to transform a stochastic interest rate process into a stochastic diffusion with unit volatility. By the binomial lattice and linear interpolation,the prices of Asian options on yields can be obtained. As the number of nodes in the tree structure grows linearly with the number of time steps, the computational speed is improved. The numerical experiments to verify the validity of the lattice are also provided.
文摘This paper studies the convergence rates of a moving mesh implicit finite difference method with interpolation for partial differential equations （PDEs） with moving boundary arising in Asian option pricing. The moving mesh scheme is based on Rnnacher timestepping approach whose idea is running the implicit Euler schemes in the initial few steps and continuing with Crank-Nicolson schemes. With graded meshes for time direction and moving meshes for space direction, the fully discretized scheme is constructed using quadratic interpolation between two consecutive time level for the PDEs with moving boundary. The second-order convergence rates in both time and space are proved and numerical examples are carried out to confirm the theoretical results.
文摘In this paper, we derive two general parameterized boundaries of finite difference scheme for VeSe~＇s PDE which is used to price both fixed and floating strike Asian options. Using these two boundaries, we can deal with all kinds of situations, especially, some extreme cases, like overhigh volatility, very small volatility, etc, under which the Asian option is usually mispriced in many existing numerical methods. Numerical results show that our boundaries are pretty efficient.
基金partially supported by China Postdoctoral Science Foundation under Grant No.2012M510377National Natural Science Foundation of China under Grant Nos.71373043,71331006,and 71171119+2 种基金the National Social Science Foundation of China under Grant No.11AZD010Program for New Century Excellent Talents in University under Grant No.NCET-10-0337Program for Excellent Talents,UIBE
文摘This paper presents simple and fast algorithms for computing very tight upper and lower bounds on the prices of American Asian options in the binomial model.The authors choose two types sets of the actual arithmetic average prices,instead of the simulated values in other existing models,as the representative average prices at each node of the binomial tree.This approach simplifies effectively the computation and reduces the error caused by the linear interpolation.Numerical results show that the approach produces accurate upper and lower bounds compared to the other existing methods based on the binomial tree.
文摘In this paper, we use a modified path simulation method for valuation of Asian American Options. This method is a modification of the path simulation model proposed by Tiley. We assume that the behavior of the log return of the underlying assets follows the Variance Gamma (VG) process, since its distribution is heavy tail and leptokurtic. We provide sensitivity analysis of this method and compare the obtained prices to Asian European option prices.
