A Discontinuous Galerkin Method for Two-dimensional PDE Models of Asian Options

In our previous research we have focused on the problem of plain vanilla option valuation using discontinuous Galerkin method for numerical PDE solution. Here we extend a simple one-dimensional problem into two-dimensional one and design a scheme for valuation of Asian options, i.e. options with payoff depending on the average of prices collected over prespecified horizon. The algorithm is based on the approach combining the advantages of the finite element methods together with the piecewise polynomial generally discontinuous approximations. Finally, an illustrative example using DAX option market data is provided.