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Short Maturity Asian Options for the CEV Model

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  • Dan Pirjol
  • Lingjiong Zhu

Abstract

We present a rigorous study of the short maturity asymptotics for Asian options with continuous-time averaging, under the assumption that the underlying asset follows the Constant Elasticity of Variance (CEV) model. We present an analytical approximation for the Asian options prices which has the appropriate short maturity asymptotics, and demonstrate good numerical agreement of the asymptotic results with the results of Monte Carlo simulations and benchmark test cases for option parameters relevant in practical applications.

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  • Dan Pirjol & Lingjiong Zhu, 2017. "Short Maturity Asian Options for the CEV Model," Papers 1702.03382, arXiv.org.
    • Handle: RePEc:arx:papers:1702.03382
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    Cited by:

    1. Rupak Chatterjee & Zhenyu Cui & Jiacheng Fan & Mingzhe Liu, 2018. "An efficient and stable method for short maturity Asian options," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1470-1486, December.
    2. Dan Pirjol, 2020. "Asymptotic expansion for the Hartman-Watson distribution," Papers 2001.09579, arXiv.org, revised Feb 2021.
    3. Dan Pirjol & Jing Wang & Lingjiong Zhu, 2017. "Short Maturity Forward Start Asian Options in Local Volatility Models," Papers 1710.03160, arXiv.org.

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