|
|
 Login |
|
|
|
Volume 10/Number 2, Winter 2006/07 Research Papers Partially exact and bounded approximations for arithmetic Asian options Roger Lord
Financial Engineering (UC-R-380), Rabobank International, PO Box 17100, 3500 HG Utrecht, The Netherlands This paper considers the pricing of European Asian options in the Black– Scholes framework. All approaches we consider are readily extendable to the case of an Asian basket option. We consider three methods for evaluating the price of an Asian option, and contribute to all three. First, we show the link between the approaches of Rogers and Shi (1995), Andreasen (1998), Hoogland and Neumann (2000a,b) and Veˇceˇr (2001). For the latter formulation we propose two reductions, which increase the numerical stability and reduce the calculation time. Second, we show how a closed-form expression can be derived for Curran’s and Rogers and Shi’s lower bound for the general case of multiple underlyings. Third, we considerably sharpen Thompson’s (1999a,b) upper bound such that it is tighter than all known upper bounds. Finally, we consider analytical approximations and combine the traditional moment matching approximations with Curran’s conditioning approach. The resulting class of partially exact and bounded approximations can be proven to lie between a sharp lower and upper bound. Using numerical examples we demonstrate that they outperform all current state-of-the-art bounds and approximations.
|
|
|
|
| Subscribe to The Journal of Computational Finance and every quarter you will receive: |
• Innovative research papers written by leading academics in the field
• Detailed insight into numerical and computational techniques in the pricing, hedging and risk management of financial instruments
• Online access to all research papers published in the history of the journal giving you access to a complete library of papers on computational finance
• Email Alerts notifying you when new issues are posted
To subscribe now click here. |
|
|
What to do if you do not know your username and password:
• If you are a The Journal of Computational Finance subscriber, click here and we will email you straight away with your username and password.
What to do if you are not a The Journal of Computational Finance subscriber:
• If you are not a The Journal of Computational Finance subscriber, click here to subscribe now or click here for a FREE sample.
Further information about The Journal of Computational Finance:
• Are you a new user? Click here for our guide.
• Are you having problems logging in to this website? Please click here for help. |
|
|
 |
 |
|
|
www.thejournalofcomputationalfinance.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Risk Books and Journals group on 
is where editors, authors and readers can launch discussions about published and forthcoming books.
Click here to read these discussions and become part of the Risk Books and Journals group. |
|
|
