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Pricing Asian options for jump diffusion

Bayraktar, Erhan and Xing, Hao (2010) Pricing Asian options for jump diffusion. Mathematical Finance, 21 (1). pp. 117-143. ISSN 0960-1627

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Identification Number: 10.1111/j.1467-9965.2010.00426.x


We construct a sequence of functions that uniformly converge (on compact sets) to the price of an Asian option, which is written on a stock whose dynamics follow a jump diffusion. The convergence is exponentially fast. We show that each element in this sequence is the unique classical solution of a parabolic partial differential 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.

Item Type: Article
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Additional Information: © 2010 Wiley-Blackwell
Divisions: Statistics
Subjects: H Social Sciences > HA Statistics
Date Deposited: 28 Jan 2011 15:50
Last Modified: 16 May 2024 01:05

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