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2013 An Alternating-Direction Implicit Difference Scheme for Pricing Asian Options
Zhongdi Cen, Anbo Le, Aimin Xu
J. Appl. Math. 2013: 1-8 (2013). DOI: 10.1155/2013/605943

Abstract

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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Zhongdi Cen. Anbo Le. Aimin Xu. "An Alternating-Direction Implicit Difference Scheme for Pricing Asian Options." J. Appl. Math. 2013 1 - 8, 2013. https://doi.org/10.1155/2013/605943

Information

Published: 2013
First available in Project Euclid: 14 March 2014

zbMATH: 1272.91124
MathSciNet: MR3068181
Digital Object Identifier: 10.1155/2013/605943

Rights: Copyright © 2013 Hindawi

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