We present a new methodology based on maturity randomization to price discretely monitored arithmetic Asian options when the underlying asset evolves according to a generic Lévy process. Our randomization technique considers the option expiry to be a random variable distributed according to a geometric distribution of a parameter independent of the underlying process. This allows one to transform the pricing backward procedure into a set of independent integral equations. Numerical procedures for a fast and accurate solution of the pricing problem are provided.

Pricing Discretely Monitored Asian Options by Maturity Randomization

MARAZZINA, DANIELE;
2011-01-01

Abstract

We present a new methodology based on maturity randomization to price discretely monitored arithmetic Asian options when the underlying asset evolves according to a generic Lévy process. Our randomization technique considers the option expiry to be a random variable distributed according to a geometric distribution of a parameter independent of the underlying process. This allows one to transform the pricing backward procedure into a set of independent integral equations. Numerical procedures for a fast and accurate solution of the pricing problem are provided.
2011
File in questo prodotto:
File Dimensione Formato  
FMM-2011.pdf

Accesso riservato

: Publisher’s version
Dimensione 379.18 kB
Formato Adobe PDF
379.18 kB Adobe PDF   Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11311/605880
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 25
  • ???jsp.display-item.citation.isi??? 22
social impact