On a degenerate parabolic equation arising in pricing of Asian options
نویسندگان
چکیده
منابع مشابه
On a Degenerate Parabolic Equation Arising in Pricing of Asian Options
We study a certain one dimensional, degenerate parabolic partial differential equation with a boundary condition which arises in pricing of Asian options. Due to degeneracy of the partial differential operator and the non-smooth boundary condition, regularity of the generalized solution of such a problem remained unclear. We prove that the generalized solution of the problem is indeed a classic...
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Večeř derived a degenerate parabolic equation with a boundary condition characterizing the price of Asian options for both discrete and continuous arithmetic average. It is well understood that there exists a unique probabilistic solution to such a problem. However, due to degeneracy of the partial differential operator and lack of smoothness in the boundary data, the regularity of the probabil...
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Path-dependent options are options whose payoff depends nontrivially on the price history of an asset. They play an important role in financial markets. Unfortunately, pricing path-dependent options could be difficult in terms of speed and/or accuracy. The Asian option is one of the most prominent examples. The Asian option is an option whose payoff depends on the arithmetic average price of th...
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A simple and numerically stable 2-term partial differential equation characterizing the price of any type of arithmetically averaged Asian option is given. The approach includes both continuously and discretely sampled options and it is easily extended to handle continuous or discrete dividend yields. In contrast to present methods, this approach does not require to implement jump conditions fo...
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ژورنال
عنوان ژورنال: Journal of Mathematical Analysis and Applications
سال: 2009
ISSN: 0022-247X
DOI: 10.1016/j.jmaa.2008.10.019