Journal of Applied Mathematics
Volume 2013 (2013), Article ID 605943, 8 pages
Research Article

An Alternating-Direction Implicit Difference Scheme for Pricing Asian Options

Institute of Mathematics, Zhejiang Wanli University, Zhejiang, Ningbo 315100, China

Received 1 December 2012; Revised 27 May 2013; Accepted 28 May 2013

Academic Editor: Shan Zhao

Copyright © 2013 Zhongdi Cen et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We propose a fast and stable numerical method to evaluate two-dimensional partial differential equation (PDE) for pricing arithmetic average Asian options. The numerical method is deduced by combining an alternating-direction technique and the central difference scheme on a piecewise uniform mesh. The numerical scheme is stable in the maximum norm, which is true for arbitrary volatility and arbitrary interest rate. It is proved that the scheme is second-order convergent with respect to the asset price. Numerical results support the theoretical results.