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Arithmetic Asian Options under Stochastic Delay Models

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  • Nairn McWilliams
  • Sotirios Sabanis

Abstract

Motivated by the increasing interest in past-dependent asset pricing models, shown in recent years by market practitioners and prominent authors such as Hobson and Rogers (1998, Complete models with stochastic volatility, Mathematical Finance, 8(1), pp. 27--48), we explore option pricing techniques for arithmetic Asian options under a stochastic delay differential equation approach. We obtain explicit closed-form expressions for a number of lower and upper bounds and compare their accuracy numerically.

Suggested Citation

  • Nairn McWilliams & Sotirios Sabanis, 2011. "Arithmetic Asian Options under Stochastic Delay Models," Applied Mathematical Finance, Taylor & Francis Journals, vol. 18(5), pages 423-446, February.
    • Handle: RePEc:taf:apmtfi:v:18:y:2011:i:5:p:423-446
    DOI: 10.1080/1350486X.2011.567119
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    References listed on IDEAS

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