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A New Price of the Arithmetic Asian Option: A Simple Formula

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  • Alghalith, Moawia

Abstract

We introduce a simple, explicit formula for pricing the arithmetic Asian options. The pricing formula is as simple as the classical Black-Scholes formula.

Suggested Citation

  • Alghalith, Moawia, 2019. "A New Price of the Arithmetic Asian Option: A Simple Formula," MPRA Paper 117047, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117047
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    File URL: https://mpra.ub.uni-muenchen.de/117047/2/MPRA_paper_117047.pdf
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    References listed on IDEAS

    as
    1. Cui, Zhenyu & Lee, Chihoon & Liu, Yanchu, 2018. "Single-transform formulas for pricing Asian options in a general approximation framework under Markov processes," European Journal of Operational Research, Elsevier, vol. 266(3), pages 1134-1139.
    2. Aprahamian, Hrayer & Maddah, Bacel, 2015. "Pricing Asian options via compound gamma and orthogonal polynomials," Applied Mathematics and Computation, Elsevier, vol. 264(C), pages 21-43.
    3. Sander Willems, 2019. "Asian option pricing with orthogonal polynomials," Quantitative Finance, Taylor & Francis Journals, vol. 19(4), pages 605-618, April.
    4. Vadim Linetsky, 2004. "Spectral Expansions for Asian (Average Price) Options," Operations Research, INFORMS, vol. 52(6), pages 856-867, December.
    5. Bernard Lapeyre & Emmanuel Temam, 2001. "Competitive Monte Carlo methods for the pricing of Asian options," Post-Print hal-01667057, HAL.
    6. Michael Curran, 1994. "Valuing Asian and Portfolio Options by Conditioning on the Geometric Mean Price," Management Science, INFORMS, vol. 40(12), pages 1705-1711, December.
    7. Corsaro, Stefania & Kyriakou, Ioannis & Marazzina, Daniele & Marino, Zelda, 2019. "A general framework for pricing Asian options under stochastic volatility on parallel architectures," European Journal of Operational Research, Elsevier, vol. 272(3), pages 1082-1095.
    8. Gambaro, Anna Maria & Kyriakou, Ioannis & Fusai, Gianluca, 2020. "General lattice methods for arithmetic Asian options," European Journal of Operational Research, Elsevier, vol. 282(3), pages 1185-1199.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Arithmetic Asian option pricing; the arithmetic average of the price; average of log-normal; the Black-Scholes formula.;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G0 - Financial Economics - - General

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