Asymptotic behavior of prices of path dependent options
In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain vanillas. We give some examples whose underlying assets behave as some popular Levy processes. Moreover, we give some payoffs and functions used to approximate them.
References listed on IDEAS
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- Robert C. Merton, 2005.
"Theory of rational option pricing,"
World Scientific Book Chapters,
in: Theory Of Valuation, chapter 8, pages 229-288
World Scientific Publishing Co. Pte. Ltd..
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- N. Hilber & N. Reich & C. Schwab & C. Winter, 2009. "Numerical methods for Lévy processes," Finance and Stochastics, Springer, vol. 13(4), pages 471-500, September.
- Grant Armstrong, 2001. "Valuation formulae for window barrier options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 8(4), pages 197-208.
- Hans-Peter Bermin, 2000. "Hedging lookback and partial lookback options using Malliavin calculus," Applied Mathematical Finance, Taylor & Francis Journals, vol. 7(2), pages 75-100.
- Yuji Hishida & Kenji Yasutomi, 2005. "On the asymptotic behavior of the prices of Asian options," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 12(4), pages 289-306, December. Full references (including those not matched with items on IDEAS)
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