A Semi-Lagrangian Approach for American Asian Options under Jump Diffusion
نویسندگان
چکیده
A semi-Lagrangian method is presented to price continuously observed fixed strike Asian options. At each timestep a set of one dimensional partial integral differential 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 non-smoothness at the strike in the payoff affects the convergence rate; sub-quadratic convergence rate is observed.
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ورودعنوان ژورنال:
- SIAM J. Scientific Computing
دوره 27 شماره
صفحات -
تاریخ انتشار 2005