Two Splitting Methods for a Fixed Strike Asian Option

  • Tatiana P. Chernogorova
  • Lubin G. Vulkov
Part of the Lecture Notes in Computer Science book series (LNCS, volume 8236)


The valuation of Asian Options can often be reduced to the study of initial boundary problems for ultra-parabolic equations. Two splitting methods are used to transform the whole time-dependent problem of a fixed strike Asian option into two unsteady subproblems of a smaller complexity. The first subproblem is a time-dependent convection-diffusion and the finite volume difference method of S. Wang [6] is applied for its discretization. The second one is a transport problem and is approximated by monotone weighted difference schemes. The positivity property of the numerical methods is established. Numerical experiments are discussed.


Option Price Risky Asset Discontinuous Galerkin Method Dividend Yield Risk Free Asset 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Tatiana P. Chernogorova
    • 1
  • Lubin G. Vulkov
    • 2
  1. 1.FMIUniversity of SofiaSofiaBulgaria
  2. 2.FNSEUiversity of RousseRousseBulgaria

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