Asian options are popular path-dependent financial derivatives.This paper uses lattices to price Asian options that are discretely monitored, which is the case in practice in contrast to the continuouslymonitored version usually encountered in the literature. This paper presents the first provably quadratic-time convergent lattice algorithmfor pricing European-style discretely monitored Asian options. It is the most efficient lattice algorithm with convergence guarantees.The algorithm relies on the Lagrange multipliers to choose the number of states for each node of the lattice.Extensive numerical experiments and comparisons with many existing numerical methods confirm the performance claims and the competitiveness of our algorithm.Some- what surprisingly, this result places European-style discretely monitored Asian options in the same complexity class as vanilla options.
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