Discrete Asian barrier options

R. Zvan and P. A. Forsyth and K. R. Vetzal

Journal of Computational Finance

Abstract: ABSTRACT A partial differential equation method based on using auxiliary variables is described for pricing discretely monitored Asian options with or without barrier features. The barrier provisions can be applied to either the underlying asset or to the average. They may also be of either instantaneous or delayed effect (i.e. Parisian style). Numerical examples demonstrate that this method can be used for pricing floating strike, fixed strike, American, or European options. In addition, examples are provided which indicate that an upstream biased quadratic interpolation is superior to linear interpolation for handling the jump conditions at observation dates. Moreover, it is shown that defining the auxiliary variable as the average rather than the running sum is more rapidly convergent for American-Asian options.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-computational-finance ... sian-barrier-options (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ0:2160471

Access Statistics for this article

More articles in Journal of Computational Finance from Journal of Computational Finance
Bibliographic data for series maintained by Thomas Paine ().