Loading…

Pricing Asian options in the framework of the binomial model: A quick algorithm

The valuation of Asian options has challenged both financial academia and practitioners for more than a decade. This paper presents a method of pricing fixed-strike Asian options whose payoffs depend on the arithmetic averages of the underlying assets in the framework of the binomial model. The Gaus...

Full description

Saved in:
Bibliographic Details
Published in:Journal of derivatives & hedge funds 2003-07, Vol.9 (3), p.203
Main Authors: Neave, Edwin H, Ye, George L
Format: Article
Language:English
Subjects:
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The valuation of Asian options has challenged both financial academia and practitioners for more than a decade. This paper presents a method of pricing fixed-strike Asian options whose payoffs depend on the arithmetic averages of the underlying assets in the framework of the binomial model. The Gaussian generating function is used to sort paths and to exploit the structural information of the binomial tress. The method proves to be highly accurate and very efficient in computation. [PUBLICATION ABSTRACT]
ISSN:1753-9641
1753-965X