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The derivatives of Asian call option prices

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  • Jungmin Choi
  • Kyounghee Kim

Abstract

The distribution of a time integral of geometric Brownian motion is not well understood. To price an Asian option and to obtain measures of its dependence on the parameters of time, strike price, and underlying market price, it is essential to have the distribution of time integral of geometric Brownian motion and it is also required to have a way to manipulate its distribution. We present integral forms for key quantities in the price of Asian option and its derivatives ({\it{delta, gamma,theta, and vega}}). For example for any $a>0$ $\mathbb{E} [ (A_t -a)^+] = t -a + a^{2} \mathbb{E} [ (a+A_t)^{-1} \exp (\frac{2M_t}{a+ A_t} - \frac{2}{a}) ]$, where $A_t = \int^t_0 \exp (B_s -s/2) ds$ and $M_t =\exp (B_t -t/2).$

Suggested Citation

  • Jungmin Choi & Kyounghee Kim, 2007. "The derivatives of Asian call option prices," Papers 0712.1093, arXiv.org.
    • Handle: RePEc:arx:papers:0712.1093
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