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Geometric Asian barrier option pricing formulas of uncertain stock model

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  • Gao, Rong
  • Wu, Wei
  • Lang, Chao
  • Lang, Liying

Abstract

In the high-risk modern financial market, option is an effective tool to hedge the risks caused by uncertain demand, the fluctuation of price and foreign exchange rate, because the option can provide the holder with an entitlement to sell or purchase an asset with an exercise price. The acquisition of this entitlement requires the investor to pay option fee, which raises the option pricing issue. This article analyzes how to price Geometric Asian barrier option for uncertain stock model, where barrier option becomes activated or inactivated depending on whether a given barrier level is hit. Here, we suppose that stock price obeys an uncertain differential equation, based on which the pricing formulas of Geometric Asian barrier option are discovered. Furthermore, to express how to use the pricing formulas to calculate corresponding option prices, some numerical examples are given.

Suggested Citation

  • Gao, Rong & Wu, Wei & Lang, Chao & Lang, Liying, 2020. "Geometric Asian barrier option pricing formulas of uncertain stock model," Chaos, Solitons & Fractals, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:chsofr:v:140:y:2020:i:c:s0960077920305749
    DOI: 10.1016/j.chaos.2020.110178
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    References listed on IDEAS

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    Cited by:

    1. Guo, Peidong & Zhang, Jizhou & Wang, Qian, 2020. "Path-dependent game options with Asian features," Chaos, Solitons & Fractals, Elsevier, vol. 141(C).
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    3. Liu, Yang & Lio, Waichon, 2024. "Power option pricing problem of uncertain exponential Ornstein–Uhlenbeck model," Chaos, Solitons & Fractals, Elsevier, vol. 178(C).

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