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Pricing Asian options in a semimartingale model

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  • Jan Vecer
  • Mingxin Xu

Abstract

In this paper we studyy arithmetic Asian options when the underlying stock is driven by special semimartingale processes. We show that the inherently path dependent problem of pricing Asian options can be transformed into a problem without path dependence in the payoff function. We also show that the price is driven by a process with independent increments, Levy processes being a special case. This approach applies for both discretely or continuously options.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

Volume (Year): 4 (2004)
Issue (Month): 2 ()
Pages: 170-175

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Handle: RePEc:taf:quantf:v:4:y:2004:i:2:p:170-175

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Cited by:
  1. Alexander Novikov & Nino Kordzakhia, 2013. "On lower and upper bounds for Asian-type options: a unified approach," Papers 1309.2383, arXiv.org.
  2. Ewald, Christian-Oliver & Menkens, Olaf & Hung Marten Ting, Sai, 2013. "Asian and Australian options: A common perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 1001-1018.
  3. Akira Yamazaki, 2014. "Pricing average options under time-changed Lévy processes," Review of Derivatives Research, Springer, vol. 17(1), pages 79-111, April.
  4. Kyungsub Lee, 2013. "Recursive formula for arithmetic Asian option prices," Papers 1311.4969, arXiv.org.
  5. Angelos Dassios & Jayalaxshmi Nagaradjasarma, 2006. "The square-root process and Asian options," Quantitative Finance, Taylor & Francis Journals, vol. 6(4), pages 337-347.
  6. Eberlein, Ernst & Papapantoleon, Antonis, 2005. "Equivalence of floating and fixed strike Asian and lookback options," Stochastic Processes and their Applications, Elsevier, vol. 115(1), pages 31-40, January.
  7. Angelos Dassios & Jayalaxshmi Nagaradjasarma, 2006. "The square-root process and Asian options," LSE Research Online Documents on Economics 2851, London School of Economics and Political Science, LSE Library.
  8. Nomikos, Nikos K. & Kyriakou, Ioannis & Papapostolou, Nikos C. & Pouliasis, Panos K., 2013. "Freight options: Price modelling and empirical analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 82-94.

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