Journal of Computational Finance

Risk.net

Fast simplified approaches to Asian option pricing

D.Y. Tangman, A. A. I. Peer, N. Rambeerich, M. Bhuruth

ABSTRACT

In this paper a general and simple framework is proposed for pricing Asian options under a variety of pricing models, including the Merton model and the Carr- Geman-Madan-Yor model. The approach uses the exponential time integration scheme in combination with a dimensional splitting technique. For discretely observed Asian options, a simple splitting technique is applied, while a Strang splitting strategy is employed to improve the temporal accuracy for continuously observed averages. For European Asian options it is shown that spectral accuracy can be achieved using a Chebyshev discretization. Barrier features are easily enforced and an operator-splitting technique is used to price Amerasians. For the Black-Scholes model we show that employing best rational approximation via Carathéodory-Fejér approximation leads to algorithms with linear complexity in each spatial dimension.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: