Research articles
ScienceAsia (): 67-69 |doi:
10.2306/scienceasia1513-1874...067
Solving an Asian option PDE via the Laplace transform
Zieneb Ali Elshegmania,*, Rokiah Rozita Ahmadb
ABSTRACT: Solving the Black-Scholes PDE of the arithmetic Asian options is one of the most difficult problems in financial mathematics. A variety of ways ways have been proposed to address the problem. In this study, we use the PDE approach by presenting an efficient method for pricing a continuous arithmetic Asian option. Using the Laplace transform we reduce the three-dimension partial differential equation of the arithmetic Asian option into a two-dimension ordinary differential equation. Its final analytical solution is presented. We conclude that this method is applicable to all types of arithmetic Asian options.
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| a |
School of Mathematical Sciences, Faculty of Education, University Misurata Libya, University Kebangsaan Malaysia |
| b |
School of Mathematical Sciences, Faculty of Science and Technology, University Kebangsaan Malaysia |
* Corresponding author, E-mail: zelsheqmani@yahoo.com
Received 7 Jan 2013, Accepted 5 Apr 2013
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