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Black-Scholes formulae for Asian options in local volatility models

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Author Info

  • Paolo Foschi

    () (Università di Bologna)

  • Stefano Pagliarani

    () (Università di Padova)

  • Andrea Pascucci

    () (Università di Bologna)

Abstract

We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.

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Bibliographic Info

Paper provided by Department of Statistics, University of Bologna in its series Quaderni di Dipartimento with number 7.

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Length: 29
Date of creation: 2011
Date of revision:
Handle: RePEc:bot:quadip:111

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Related research

Keywords: Asian Options; Degenerate Diffusion Processes; Transition Density Functions; Analytic Approximations; Option Pricing;

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Pricing Asian options
    by Economic Logician in Economic Logic on 2011-09-20 14:02:00
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Cited by:
  1. Stefano, Pagliarani & Pascucci, Andrea & Candia, Riga, 2011. "Expansion formulae for local Lévy models," MPRA Paper 34571, University Library of Munich, Germany.

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  1. Economic Logic blog

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