Approximately Pricing Asian Arithmetic Power Option

• Main Authors: Yu-Da Liao, 廖昱達
• Other Authors: Hong-Kun Xu
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/30156355527341931402

碩士 === 國立中山大學 === 應用數學系研究所 === 102 === An Asia option is a path-dependent option whose payoff depends on the average of the underlying asset price over a certain time interval. The time interval can be the entire interval of the option''s life from the initiation to the expiration, or beginning from some time later than the initiation until the option''s expiration. The average can be arithmetic or geometric. In this paper we derive an approximate pricing formula for the Asian arithmetic power option. The approximate valuation formula is obtained by the risk-neutral valuation method and the linear approximation method is used.