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Efficient pricing of discrete arithmetic Asian options under mean reversion and jumps based on Fourier-cosine expansions

Huang, C-S and O'Hara, JG and Mataramvura, S (2017) 'Efficient pricing of discrete arithmetic Asian options under mean reversion and jumps based on Fourier-cosine expansions.' Journal of Computational and Applied Mathematics, 311. 230 - 238. ISSN 0377-0427

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Abstract

We propose an efficient pricing method for arithmetic Asian options based on Fourier-cosine expansions. In particular, we allow for mean reversion and jumps in the underlying price dynamics. There is an extensive body of empirical evidence in the current literature that points to the existence and prominence of such anomalies in the prices of certain asset classes, such as commodities. Our efficient pricing method is derived for the discretely monitored versions of the European-style arithmetic Asian options. The analytical solutions obtained from our Fourier-cosine expansions are compared to the benchmark fast Fourier transform based pricing for the examination of its accuracy and computational efficiency

Item Type: Article
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Divisions: Faculty of Science and Health > Computer Science and Electronic Engineering, School of
Depositing User: John O'Hara
Date Deposited: 05 Aug 2016 13:34
Last Modified: 07 Aug 2018 11:15
URI: http://repository.essex.ac.uk/id/eprint/17370

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