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TVD, WENO and blended BDF discretizations for Asian options

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Computing and Visualization in Science

Abstract

In this paper, we discuss topics for a fast and accurate solution of continuous American-style Asian option problems from computational finance. These problems lead to 2D time-dependent convection-dominated partial differential equations with a free boundary. As a pre-study for accurate discretization schemes in “asset price space” and in time, we solve numerically reference problems based on the Black–Scholes equation with small volatility and with discontinuous final conditions.

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Authors and Affiliations

  1. Fac. Information, Technology and Systems, Delft University of Technology, Delft, The Netherlands

    C.W. Oosterlee

  2. Fraunhofer Institute for Algorithms and Scientific Computing (SCAI), D-53754, Sankt Augustin, Germany

    J.C. Frisch

  3. C.P.S. University of Zaragoza, 50008, Zaragoza, Spain

    F.J. Gaspar

Authors
  1. C.W. Oosterlee
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  2. J.C. Frisch
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  3. F.J. Gaspar
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Correspondence to C.W. Oosterlee.

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Communicated by

M.S. Espedal, A. Quarteroni, A. Sequeira

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Oosterlee, C., Frisch, J. & Gaspar, F. TVD, WENO and blended BDF discretizations for Asian options. Comput Visual Sci 6, 131–138 (2004). https://doi.org/10.1007/s00791-003-0117-9

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  • DOI: https://doi.org/10.1007/s00791-003-0117-9

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