Numerical Schemes for Pricing Asian Options Under State-Dependent Regime-Switching Jump-Diffusion Models
Author | : Duy-Minh Dang |
Publisher | : |
Total Pages | : 30 |
Release | : 2018 |
ISBN-10 | : OCLC:1304490819 |
ISBN-13 | : |
Rating | : 4/5 (19 Downloads) |
Download or read book Numerical Schemes for Pricing Asian Options Under State-Dependent Regime-Switching Jump-Diffusion Models written by Duy-Minh Dang and published by . This book was released on 2018 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose numerical schemes for pricing Asian options when the underlying asset price follows a very general state-dependent regime-switching jump-diffusion process. Under this model, the price of the option can be obtained by solving a highly complex system of coupled two-dimensional parabolic partial integro-differential equations (PIDEs) via iterative techniques. One of the proposed schemes is provably convergent to the solution of the system of PIDEs. In addition, by treating the coupling and integral terms explicitly, over each iteration of the scheme, the pricing problem under this scheme can be partitioned into independent pricing sub-problem, with communication at the end of the iteration. Hence, this method allows for a very natural and easy-to-implement, yet efficient, parallelization of the solution process on multi-core architectures. We illustrate the accuracy and efficiency of the proposed methods by several numerical examples.