Abstract In this paper, we derive a pricing formula for arithmetic Asian options by using the Edgeworth series expansion. The approach first developed a PIDE for pricing and solved it using Mellin transform and its inverse. When a single price at a point in time might be subject to manipulation. Exotic options provide investors with new alternatives to manage their portfolio risks and speculate on various market opportunities. Apply first the integration by parts first:
The Pricing of Asian Options in Uncertain Volatility Model
When accessing websites using a web browser, ensure you use the latest available version of the browser — whether that is Internet Explorer, Google Chrome, Mozilla Firefox, Safari or another browser. In general, there's no point trying to parallelise FDM pde in 1 and 2 factors are too small. There are two basic forms: Then I used my finite difference code to check if I got the right answer and its pretty accurate but the time is a little too long. You wrote average price sampled over time so is that the future prices for each time in the averaging period? Asian options have relatively low volatility due to the averaging mechanism. Apply first the integration by parts first:
Since call option value decreases as strike price increases, the Asian call curve is under the Vanilla call curve. The table above contrasts the results from closed approximation models against price simulations implemented via CRR trees and Monte Carlo. So there is no point that is less important on the interval. Similarly we can prove that is a viscosity supersolution of In finance, there is an important case of model uncertainty called volatility uncertainty in which the uncertainty comes from the volatility coefficient.