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Asian Option Pricing under an Uncertain Volatility Model

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  • Yuecai Han
  • Chunyang Liu

Abstract

In this paper, we study the asymptotic behavior of Asian option prices in the worst-case scenario under an uncertain volatility model. We derive a procedure to approximate Asian option prices with a small volatility interval. By imposing additional conditions on the boundary condition and splitting the obtained Black–Scholes–Barenblatt equation into two Black–Scholes-like equations, we obtain an approximation method to solve a fully nonlinear PDE.

Suggested Citation

  • Yuecai Han & Chunyang Liu, 2020. "Asian Option Pricing under an Uncertain Volatility Model," Mathematical Problems in Engineering, Hindawi, vol. 2020, pages 1-10, April.
    • Handle: RePEc:hin:jnlmpe:4758052
    DOI: 10.1155/2020/4758052
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