Efficient, exact algorithms for Asian options with multiresolution lattices

Tian-Shyr Dai*, Yuh Dauh Lyuu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


Asian options are a kind of path-dependent derivative. How to price such derivatives efficiently and accurately has been a long-standing research and practical problem. This paper proposes a novel multiresolution (MR) trinomial lattice for pricing European- and American-style arithmetic Asian options. Extensive experimental work suggests that this new approach is both efficient and more accurate than existing methods. It also computes the numerical delta accurately. The MR algorithm is exact as no errors are introduced during backward induction. In fact, it may be the first exact discrete-time algorithm to break the exponential-time barrier. The MR algorithm is guaranteed to converge to the continuous-time value.

Original languageEnglish
Pages (from-to)181-203
Number of pages23
JournalReview of Derivatives Research
Issue number2
StatePublished - 1 Jan 2002


  • Asian options
  • Multiresolution
  • Path-dependent options
  • Trinomial model


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