An alternating-direction implicit difference scheme for pricing Asian options (Q364443)
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English | An alternating-direction implicit difference scheme for pricing Asian options |
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An alternating-direction implicit difference scheme for pricing Asian options (English)
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9 September 2013
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Summary: We propose a fast and stable numerical method to evaluate two-dimensional partial differential equation (PDE) for pricing arithmetic average Asian options. The numerical method is deduced by combining an alternating-direction technique and the central difference scheme on a piecewise uniform mesh. The numerical scheme is stable in the maximum norm, which is true for arbitrary volatility and arbitrary interest rate. It is proved that the scheme is second-order convergent with respect to the asset price. Numerical results support the theoretical results.
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numerical method
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Asian options
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alternating-direction technique
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difference scheme
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numerical results
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