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A unified approach for the pricing of options relating to averages

Author

Listed:
  • Hideharu Funahashi

    (Mizuho Securities Co. Ltd.)

  • Masaaki Kijima

    (Tokyo Metropolitan University)

Abstract

In this paper, we consider generalized Asian options and propose a unified approximation method for the pricing of such options when the underlying process is a diffusion. Through numerical examples, we show that our approximation method is accurate enough to be used in practice for the pricing of any type of Asian options that has been treated separately in the literature. Comparisons are made with the existing methods in the literature to support the usefulness of our method.

Suggested Citation

  • Hideharu Funahashi & Masaaki Kijima, 2017. "A unified approach for the pricing of options relating to averages," Review of Derivatives Research, Springer, vol. 20(3), pages 203-229, October.
    • Handle: RePEc:kap:revdev:v:20:y:2017:i:3:d:10.1007_s11147-017-9128-4
    DOI: 10.1007/s11147-017-9128-4
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    References listed on IDEAS

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    1. Ning Cai & Chenxu Li & Chao Shi, 2014. "Closed-Form Expansions of Discretely Monitored Asian Options in Diffusion Models," Mathematics of Operations Research, INFORMS, vol. 39(3), pages 789-822, August.
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    Citations

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    Cited by:

    1. Hideharu Funahashi & Tomohide Higuchi, 2018. "An analytical approximation for single barrier options under stochastic volatility models," Annals of Operations Research, Springer, vol. 266(1), pages 129-157, July.
    2. J. Lars Kirkby & Duy Nguyen, 2020. "Efficient Asian option pricing under regime switching jump diffusions and stochastic volatility models," Annals of Finance, Springer, vol. 16(3), pages 307-351, September.

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    More about this item

    Keywords

    Generalized Asian option; Floating strike; Fixed strike; Discretely sampled; Continuously sampled; Forward-starting; In-progress; Australian-Asian option;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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