DG method for the numerical pricing of two-asset European-style Asian options with fixed strike

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dc.contributor.authorHozman Jiřícs
dc.contributor.authorTichý Tomášcs
dc.date.accessioned2018-09-25T12:17:09Z
dc.date.available2018-09-25T12:17:09Z
dc.date.issued2017cs
dc.description.abstractThe evaluation of option premium is a very delicate issue arising from the assumptions made under a financial market model, and pricing of a wide range of options is generally feasible only when numerical methods are involved. This paper is based on our recent research on numerical pricing of path-dependent multi-asset options and extends these results also to the case of Asian options with fixed strike. First, we recall the three-dimensional backward parabolic PDE describing the evolution of European-style Asian option contracts on two assets, whose payoff depends on the difference of the strike price and the average value of the basket of two underlying assets during the life of the option. Further, a suitable transformation of variables respecting this complex form of a payoff function reduces the problem to a two-dimensional equation belonging to the class of convection-diffusion problems and the discontinuous Galerkin (DG) method is applied to it in order to utilize its solving potentials. The whole procedure is accompanied with theoretical results and differences to the floating strike case are discussed. Finally, reference numerical experiments on real market data illustrate comprehensive empirical findings on Asian options.
dc.format.extent26cs
dc.identifier.doi10.21136/AM.2017.0176-17
dc.identifier.issn0862-7940cs
dc.identifier.urihttps://dspace.tul.cz/handle/15240/31626
dc.identifier.urihttp://am.math.cas.cz/full/62/6/am62_6_5.pdf
dc.language.isoengcs
dc.publisherInstitute of Mathematics of the Academy of Sciences of the Czech Republiccs
dc.publisher.cityPrahacs
dc.relation.ispartofseries1cs
dc.relation.urihttp://articles.math.cas.cz/10.21136/AM.2017.0176-17/?type=Fcs
dc.subjectoption pricingcs
dc.subjectdiscontinuous Galerkin methodcs
dc.subjectAsian optioncs
dc.subjectbasket optioncs
dc.subjectfixed strikecs
dc.titleDG method for the numerical pricing of two-asset European-style Asian options with fixed strikeen
dc.titleDG method for the numerical pricing of two-asset European-style Asian options with fixed strikecs
local.citation.epage607-632cs
local.citation.spage607-632cs
local.identifier.publikace5090
local.identifier.wok419946700005en
local.relation.issue6cs
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