Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4628351 | Applied Mathematics and Computation | 2014 | 12 Pages |
Abstract
We consider the problem of pricing arithmetic Asian options in the presence of stochastic volatility. By performing a change of numeraire introduced by Vĕcĕr, we derive a partial integro-differential equation (PIDE) for Asian options within Barndorff-Nielsen and Shephard (BNS) model framework. Then, a finite difference discretization is proposed for dealing with the terms containing the partial derivatives and a simple trapezoidal rule is used for the integral term due to jumps. Numerical experiments confirm that the developed methods are very efficient.
Related Topics
Physical Sciences and Engineering
Mathematics
Applied Mathematics
Authors
Qiuhong Shi, Xiaoping Yang,