Two Efficient Parameterized Boundaries for Vecer's Asian Option Pricing PDE

14 Pages Posted: 16 Aug 2010

See all articles by Baimin Yu

Baimin Yu

University of International Business and Economics (UIBE) - School of International Trade and Economics

Date Written: August 16, 2010

Abstract

In this paper, we derive two general parameterized boundaries of finite difference scheme for Vecer's PDE which is used to price both fixed and floating strike Asian options. Using these two boundaries, we can deal with all kinds of situations, especially, some extreme cases, like overhigh volatility, very small volatility, etc, under which the Asian option is usually mispricing in many existing numerical methods. Numerical results show that our boundaries are pretty efficient.

Keywords: Asian Option, Vecer's PDE, Parameterized Boundaries

Suggested Citation

Yu, Baimin, Two Efficient Parameterized Boundaries for Vecer's Asian Option Pricing PDE (August 16, 2010). Available at SSRN: https://ssrn.com/abstract=1659657 or http://dx.doi.org/10.2139/ssrn.1659657

Baimin Yu (Contact Author)

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

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