Adomian decomposition method for analytical solution of a continuous arithmetic Asian option pricing model

S. O. Edeki, G. O. Akinlabi, O. González-Gaxiola


One of the main issues of concern in financial mathematics has been a viable method for obtaining analytical solutions of the Black-Scholes model associated with Arithmetic Asian Option (AAO). In this paper, a proposed semi-analytical technique: Adomian Decomposition Method (ADM) is applied for the first time, for analytical solution of a continuous arithmetic Asian option model. The ADM gives the solution in explicit form with few iterations. The computational work involved is less. However, high level of accuracy is not neglected. The obtained solution conforms with those of Rogers and Shi (J. of Applied Probability 32: 1995, 1077-1088), and Elshegmani and Ahmad (ScienceAsia, 39S: 2013, 67–69). Thus, the proposed method is highly recommended for analytical solution of other versions of Asian option pricing models such as the geometric form for puts and calls, even in their time-fractional forms.


adomian decomposition method; asian option; black-scholes model; option pricing;

Full Text:



Article Metrics

Abstract view : 40 times
PDF - 28 times


  • There are currently no refbacks.

Copyright (c) 2018 Universitas Ahmad Dahlan

TELKOMNIKA Telecommunication, Computing, Electronics and Control
ISSN: 1693-6930, e-ISSN: 2302-9293
Universitas Ahmad Dahlan, 4th Campus, 9th Floor, LPPI Room
Jl. Ringroad Selatan, Kragilan, Tamanan, Banguntapan, Bantul, Yogyakarta, Indonesia 55191
Phone: +62 (274) 563515, 511830, 379418, 371120 ext. 4902, Fax: +62 274 564604

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.