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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.

Suggested Citation

  • Jan Vecer & Mingxin Xu, 2004. "Pricing Asian options in a semimartingale model," Quantitative Finance, Taylor & Francis Journals, vol. 4(2), pages 170-175.
    • Handle: RePEc:taf:quantf:v:4:y:2004:i:2:p:170-175
    DOI: 10.1080/14697680400000021
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    References listed on IDEAS

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