Asymptotic behavior of prices of path dependent options

In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain vanillas. We give some examples whose underlying assets behave as so...

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Bibliographic Details
Published in:arXiv.org 2009-11
Main Authors: Hishida, Yuji, Yasutomi, Kenji
Format: Article
Language:English
Subjects:
Asymptotic properties
Markov processes
Numerical methods
Online Access:Get full text
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Summary:In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain vanillas. We give some examples whose underlying assets behave as some popular Levy processes. Moreover, we give some payoffs and functions used to approximate them.
ISSN:2331-8422