Bulletin of the
Korean Mathematical Society
BKMS

ISSN(Print) 1015-8634 ISSN(Online) 2234-3016

Article

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Bull. Korean Math. Soc. 2016; 53(3): 733-749

Printed May 31, 2016

https://doi.org/10.4134/BKMS.b150283

Copyright © The Korean Mathematical Society.

A recursive method for discretely monitored geometric Asian option prices

Bara Kim, Jeongsim Kim, Jerim Kim, and In-Suk Wee

Korea University, Chungbuk National University, Yong In University, Korea University

Abstract

We aim to compute discretely monitored geometric Asian option prices under the Heston model. This method involves explicit formula for multivariate generalized Fourier transform of volatility process and their integrals over different time intervals using a recursive method. As numerical results, we illustrate efficiency and accuracy of our method. In addition, we simulate scenarios which show evidently practical importance of our work.

Keywords: discrete monitoring, geometric Asian option, Heston model, generalized Fourier transform

MSC numbers: Primary 91B28, 65C20