Abstract
We propose an efficient pricing method for arithmetic and geometric Asian options under exponential ĺevy processes based on Fourier cosine expansions and Clenshaw-Curtis quadrature. The pricing method is developed for both European-style and American-style Asian options and for discretely and continuously monitored versions. In the present paper we focus on the European-style Asian options. The exponential convergence rates of Fourier cosine expansions and Clenshaw-Curtis quadrature reduces the CPU time of the method to milliseconds for geometric Asian options and a few seconds for arithmetic Asian options. The method's accuracy is illustrated by a detailed error analysis and by various numerical examples.
Original language | English |
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Pages (from-to) | 399-426 |
Number of pages | 28 |
Journal | SIAM Journal on Financial Mathematics |
Volume | 4 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2013 |
Externally published | Yes |
Keywords
- Arithmetic Asian options
- Clenshaw-Curtis quadrature
- Exponential convergence
- Exponential ĺevy asset price processes
- Fourier cosine expansions