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We analyze partial differential equations arising in the evaluation of Asian options. The equations are strongly degenerate partial differential equations in three dimensions. We show that the solution of the no-arbitrage partial differential equation is sufficiently regular and standard numerical methods can be employed to approximate it.

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Forward, backward and elliptic Harnack inequalities for non-negative solutions of a class of singular, quasi-linear, parabolic equations, are established. These classes of singular equations include the p-Laplacean equation and equations of the porous medium type. Key novel points include form of a Harnack estimate backward in time, that has never been observed before, and measure theoretical proofs, as opposed to comparison principles. These Harnack estimates are established in the super-critical range (1.5) below. Such a range is optimal for a Harnack estimate to hold.