Pricing Of Average Strike Asian Call Option Using Numerical PDE Methods
In this paper, a standard PDE for the pricing of arithmetic average strike Asian call option is presented. A Crank-Nicolson Implicit Method and a Higher Order Compact finite difference scheme for this pricing problem are derived. Both these schemes were implemented for various values of risk free rate and volatility. The option prices for the same set of values of risk free rate and volatility was also computed using Monte Carlo simulation. The comparative results of the two numerical PDE methods shows close match with the Monte Carlo results, with the Higher Order Compact scheme exhibiting a better match.