Geometric Asian options: valuation and calibration with stochastic volatility
AbstractThis paper studies continuously sampled geometric Asian options�(GAO) in a stochastic volatility economy. The underlying asset price is assumed to follow a geometric Brownian motion with stochastic volatility driven by a mean-reverting process. Semi-analytical pricing formulae for GAO are derived in a fast mean-reverting stochastic volatility economy by the means of a perturbation method. The effects of stochastic volatility on averaging type options are examined. A unified regression approach is proposed to capture smiles of some geometric Asian options and European options in one shot.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 4 (2004)
Issue (Month): 3 ()
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- Wong, Hoi Ying & Chan, Chun Man, 2007. "Lookback options and dynamic fund protection under multiscale stochastic volatility," Insurance: Mathematics and Economics, Elsevier, vol. 40(3), pages 357-385, May.
- Kijima, Masaaki & Wong, Tony, 2007. "Pricing of Ratchet equity-indexed annuities under stochastic interest rates," Insurance: Mathematics and Economics, Elsevier, vol. 41(3), pages 317-338, November.
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