Two Splitting Methods for a Fixed Strike Asian Option
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  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.
KeywordsOption Price Risky Asset Discontinuous Galerkin Method Dividend Yield Risk Free Asset
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