In this article, we propose a pricing method for Asian options with early-exercise features. It is based on a two-dimensional integration and a backward recursion of the Fourier coefficients, in which several numerical techniques, like Fourier cosine expansions, Clenshaw–Curtis quadrature and the Fast Fourier Transform (FFT) are employed. Rapid convergence of the pricing method is illustrated by an error analysis. Its performance is further demonstrated by various numerical examples, where we also show the power of an implementation on Graphics Processing Units (GPUs).
Additional Metadata
Keywords Early-exercise Asian option, Arithmetic average, Fourier cosine expansion, Clenshaw–Curtis quadrature, Exponential convergence, Graphics Processing Unit (GPU) computation
THEME Other (theme 6)
Publisher north-holland
Persistent URL dx.doi.org/10.1016/j.apnum.2013.11.004
Journal Applied Numerical Mathematics
Citation
Zhang, B, & Oosterlee, C.W. (2014). Pricing of early-exercise Asian options under L\'evy processes based on Fourier cosine expansions. Applied Numerical Mathematics, 78, 14–30. doi:10.1016/j.apnum.2013.11.004