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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- Akira Yamazaki, 2014. "Pricing average options under time-changed Lévy processes," Review of Derivatives Research, Springer, vol. 17(1), pages 79-111, April.
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