Transforming Arithmetic Asian Option PDE to the Parabolic Equation with Constant Coefficients
Joint Authors
Zakaria, Roza Hazli
Elshegmani, Zieneb Ali
Jaaman, Saiful Hafiza
Ahmad, Rokiah Rozita
Source
International Journal of Mathematics and Mathematical Sciences
Issue
Vol. 2011, Issue 2011 (31 Dec. 2011), pp.1-6, 6 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2011-05-04
Country of Publication
Egypt
No. of Pages
6
Main Subjects
Abstract EN
Arithmetic Asian options are difficult to price and hedge, since at present, there is no closed-form analytical solution to price them.
Transforming the PDE of the arithmetic the Asian option to a heat equation with constant coefficients is found to be difficult or impossible.
Also, the numerical solution of the arithmetic Asian option PDE is not very accurate since the Asian option has low volatility level.
In this paper, we analyze the value of the arithmetic Asian option with a new approach using means of partial differential equations (PDEs), and we transform the PDE to a parabolic equation with constant coefficients.
It has been shown previously that the PDE of the arithmetic Asian option cannot be transformed to a heat equation with constant coefficients.
We, however, approach the problem and obtain the analytical solution of the arithmetic Asian option PDE.
American Psychological Association (APA)
Elshegmani, Zieneb Ali& Ahmad, Rokiah Rozita& Jaaman, Saiful Hafiza& Zakaria, Roza Hazli. 2011. Transforming Arithmetic Asian Option PDE to the Parabolic Equation with Constant Coefficients. International Journal of Mathematics and Mathematical Sciences،Vol. 2011, no. 2011, pp.1-6.
https://search.emarefa.net/detail/BIM-469106
Modern Language Association (MLA)
Elshegmani, Zieneb Ali…[et al.]. Transforming Arithmetic Asian Option PDE to the Parabolic Equation with Constant Coefficients. International Journal of Mathematics and Mathematical Sciences No. 2011 (2011), pp.1-6.
https://search.emarefa.net/detail/BIM-469106
American Medical Association (AMA)
Elshegmani, Zieneb Ali& Ahmad, Rokiah Rozita& Jaaman, Saiful Hafiza& Zakaria, Roza Hazli. Transforming Arithmetic Asian Option PDE to the Parabolic Equation with Constant Coefficients. International Journal of Mathematics and Mathematical Sciences. 2011. Vol. 2011, no. 2011, pp.1-6.
https://search.emarefa.net/detail/BIM-469106
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-469106