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

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• 作者：Chun-Sung Huang^a ; ^e ; ^{Chun-Sung.Huang@uct.ac.za" class="auth_mail" title="E-mail the corresponding author} ; John G. O&rsquo ; Hara^b ; ^d ; Sure Mataramvura^c ; ^e
• 关键词：Arithmetic Asian options ; Fourier-cosine expansions ; Fast Fourier transform ; Mean reverting process ; Jump&ndash ; diffusion
• 刊名：Journal of Computational and Applied Mathematics
• 出版年：2017
• 出版时间：February 2017
• 年：2017
• 卷：311
• 期：Complete
• 页码：230-238
• 全文大小：499 K

文摘

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.