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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...
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Published in: | Journal of derivatives & hedge funds 2003-07, Vol.9 (3), p.203 |
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Main Authors: | , |
Format: | Article |
Language: | English |
Subjects: | |
Online Access: | Get full text |
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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] |
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ISSN: | 1753-9641 1753-965X |