Pricing Average Options on Commodities
This paper proposes a new approximation formula for pricing average options on commodities under a stochastic volatility environment. In particular, it derives an option pricing formula under Heston and an extended Î»-SABR stochastic volatility models (which includes an extended SABR model as a special case). Moreover, numerical examples support the accuracy of the proposed average option pricing formula.
|Date of creation:||Oct 2009|
|Date of revision:||Feb 2012|
|Contact details of provider:|| Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033|
Web page: http://www.carf.e.u-tokyo.ac.jp/english/
More information through EDIRC
References listed on IDEAS
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.:
- Jean-Pierre Fouque & Chuan-Hsiang Han, 2004. "Variance reduction for Monte Carlo methods to evaluate option prices under multi-factor stochastic volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 4(5), pages 597-606.
- Graeme West, 2005. "Calibration of the SABR Model in Illiquid Markets," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(4), pages 371-385.
- Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-43.
- Jean-Pierre Fouque & Chuan-Hsiang Han, 2003. "Pricing Asian options with stochastic volatility," Quantitative Finance, Taylor & Francis Journals, vol. 3(5), pages 353-362.
- Hoi Ying Wong & Ying Lok Cheung, 2004. "Geometric Asian options: valuation and calibration with stochastic volatility," Quantitative Finance, Taylor & Francis Journals, vol. 4(3), pages 301-314.
When requesting a correction, please mention this item's handle: RePEc:cfi:fseres:cf177. 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: ()
If references are entirely missing, you can add them using this form.