Analytical Solutions of a Continuous Arithmetic Asian Model for Option Pricing using Projected Differential Transform Method.
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EBSCO
Abstract
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In financial mathematics, the procedure for finding the solutions of
the Black-Scholes model defined in terms of Arithmetic Asian Option (AAO)
is one of the most tasking issues when considering its corresponding analytical
solutions. In this paper, such analytical solution of a continuous arithmetic
Asian option is obtained through the application of a proposed semi-analytical
approach known as Projected Differential transform Method (PDTM). The
Asian option model in continuous arithmetic form witnesses the application of
PDTM for the first time in literature (to the authors’ best of knowledge). The
PDTM entails less computational work, even without neglecting the high level
of accuracy. The obtained solution is in agreement with those in literature via
other solution methods. In terms of recommendation, the proposed solution
method will be of great interest for related versions or forms of Asian option
pricing models (geometric) likewise other financial nonlinear differential
models
Keywords
QA Mathematics