A semi-Lagrangian approach for American Asian options under jump diffusion

被引：66
作者：
D'Halluin, Y [1 ]
Forsyth, PA [1 ]
Labahn, G [1 ]
机构：
[1] Univ Waterloo, Sch Comp Sci, Waterloo, ON N2L 3G1, Canada
来源：
SIAM JOURNAL ON SCIENTIFIC COMPUTING | 2005年 / 27卷 / 01期
关键词：
continuously observed Asian option; semi-Lagrangian; American option; jump diffusion; implicit discretization;
D O I：
10.1137/030602630
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
A semi-Lagrangian method is presented to price continuously observed fixed strike Asian options. At each timestep a set of one-dimensional partial integrodifferential equations (PIDEs) is solved and the solution of each PIDE is updated using semi-Lagrangian timestepping. Crank-Nicolson and second-order backward differencing timestepping schemes are studied. Monotonicity and stability results are derived. With low volatility values, it is observed that the nonsmoothness at the strike in the payoff affects the convergence rate; a subquadratic convergence rate is observed.
引用
收藏
页码：315 / 345
页数：31
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