Pricing and Hedging of Asian Options: Quasi-Explicit Solutions via Malliavin Calculus
We use Malliavin calculus and the Clark-Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and price of the Asian option as an analytic, that is closed form, expression. Numerical computations which are based on this expression are provided.
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- Carr, Peter & Ewald, Christian-Oliver & Xiao, Yajun, 2008.
"On the qualitative effect of volatility and duration on prices of Asian options,"
Finance Research Letters,
Elsevier, vol. 5(3), pages 162-171, September.
- Peter Carr & Christian-Oliver Ewald & Yajun Xiao, 2008. "On the Qualitative Effect of Volatility and Duration on Prices of Asian Options," CRIEFF Discussion Papers 0803, Centre for Research into Industry, Enterprise, Finance and the Firm.
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