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SODA
2004
ACM

An exact subexponential-time lattice algorithm for Asian options

13 years 5 months ago
An exact subexponential-time lattice algorithm for Asian options
Asian options are path-dependent derivatives. How to price them efficiently and accurately has been a longstanding research and practical problem. Asian options can be priced on the lattice. But only exponential-time algorithms are currently known if such options are to be priced on a lattice without approximation. Although efficient approximation methods are available, most of them lack accuracy guarantees. This paper proposes a novel lattice for pricing Asian options. The resulting exact pricing algorithm runs in subexponential time. This is the first exact lattice algorithm to break the exponential-time barrier. Because this lattice converges to the continuous-time stock price process, the proposed algorithm is guaranteed to converge to the desired continuous-time option value.
Tian-Shyr Dai, Yuh-Dauh Lyuu
Added 31 Oct 2010
Updated 31 Oct 2010
Type Conference
Year 2004
Where SODA
Authors Tian-Shyr Dai, Yuh-Dauh Lyuu
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