Analysis of Markov chain approximation for Asian options and occupation-time derivatives: Greeks and convergence rates (Q2040431)

Using the continuous-time Markov chain (CTMC) approximation method authors present closed form matrix expressions for the Laplace transforms of prices of the arithmetic Asian options and the occupation-time derivatives and also of Greeks of Asian options. There are suitable for efficient implementation. The results are deduced by using the pathwise differentiation method and results from Malliavin calculus. Moreover, the exact second-order convergence rates of the CTMC methods applied to the prices and Greeks of Asian options are obtained. In addition, new error analysis methods were presented for the CTMC methods used for the considered derivatives. Numerical results are presented.