Convergence of the binomial tree method for Asian options in jump-diffusion models
SCIE
SCOPUS
- Title
- Convergence of the binomial tree method for Asian options in jump-diffusion models
- Authors
- Kim, KI; Qian, XS
- Date Issued
- 2007-06-01
- Publisher
- ACADEMIC PRESS INC ELSEVIER SCIENCE
- Abstract
- The binomial tree methods (BTM), first proposed by Cox, Ross and Rubinstein [J. Cox, S. Ross, M. Rubinstein, Option pricing: A simplified approach, J. Finan. Econ. 7 (1979) 229-264] in diffusion models and extended by Amin [K.I. Amin, Jump diffusion option valuation in discrete time, J. Finance 48 (1993) 18331863] to jump-diffusion models, is one of the most popular approaches to pricing options. In this paper, we present a binomial tree method for Asian options in jump-diffusion models and show its equivalence to certain explicit difference scheme. Employing numerical analysis and the notion of viscosity solution, we prove the uniform convergence of the binomial tree method for European-style and American-style Asian options. (c) 2006 Elsevier Inc. All rights reserved.
- Keywords
- binomial tree method; Asian option; jump-diffusion model; viscosity solution; VISCOSITY SOLUTIONS; EQUATIONS
- URI
- https://oasis.postech.ac.kr/handle/2014.oak/29513
- DOI
- 10.1016/J.JMAA.2006.
- ISSN
- 0022-247X
- Article Type
- Article
- Citation
- JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS, vol. 330, no. 1, page. 10 - 23, 2007-06-01
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