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An effective hybrid variance reduction method for pricing the Asian options and its variants
In this paper, we propose a variance reduction method that combines importance sampling and control variates to price European Arithmetic Asian options and its variants (i.e., Asian options plus knock-in or knock-out options) under the Black-Scholes model. The numerical results show that the propose...
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Published in: | The North American journal of economics and finance 2020-01, Vol.51, p.100961, Article 100961 |
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Main Authors: | , , , |
Format: | Article |
Language: | English |
Subjects: | |
Citations: | Items that this one cites |
Online Access: | Get full text |
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Summary: | In this paper, we propose a variance reduction method that combines importance sampling and control variates to price European Arithmetic Asian options and its variants (i.e., Asian options plus knock-in or knock-out options) under the Black-Scholes model. The numerical results show that the proposed methods are especially efficient under the following scenarios: in the money, low volatility, more sampling dates, and higher barrier thresholds. |
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ISSN: | 1062-9408 1879-0860 |
DOI: | 10.1016/j.najef.2019.04.004 |