A New Control Variate Estimator for an Asian Option
There exist several estimators for valuing the Asian option on the arithmetic mean. Among all variance reduction estimators, the one with the control variate derived from the geometric mean has been shown by Boyle et al. (1997) to perform best so far. In this paper, a new improved control variate estimator for this type of Asian option is proposed and investigated. Simulation results confirm that it does perform better than the control variate derived from the geometric mean. The improvement becomes more significant as the volatility increases and/or as the time to expiration lengthens. Copyright Springer Science+Business Media, Inc. 2004
Volume (Year): 11 (2004)
Issue (Month): 2 (June)
|Contact details of provider:|| Web page: http://springerlink.metapress.com/link.asp?id=102851|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hua He and Akihiko Takahashi., 1995.
"A Variable Reduction Technique for Pricing Average-Rate Options,"
Research Program in Finance Working Papers
RPF-249, University of California at Berkeley.
- Hua He & Akihiko Takahashi, 2000. "A Variable Reduction Technique for Pricing Average-rate Options," International Review of Finance, International Review of Finance Ltd., vol. 1(2), pages 123-142.
- Turnbull, Stuart M. & Wakeman, Lee Macdonald, 1991. "A Quick Algorithm for Pricing European Average Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(03), pages 377-389, September.
- Boyle, Phelim & Broadie, Mark & Glasserman, Paul, 1997. "Monte Carlo methods for security pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1267-1321, June.
When requesting a correction, please mention this item's handle: RePEc:kap:apfinm:v:11:y:2004:i:2:p:143-160. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.