A Lattice Algorithm for Asian Options

• Main Authors: Su, Jing-Bo, 蘇經博
• Other Authors: Lin, Chi-Tien
• Format: Others
• Language: en_US
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/90036338583288891295

碩士 === 靜宜大學 === 財務與計算數學系 === 102 === There is no simple closed formula for the price of Asian option. So the price must be calculated using numerical approximation. Here we choose the Cox-Ross-Rubinstein binomial model. However calculating the exact binomial price would take exponential time since each stock price path must be considered. Here we study a method, which reduces the time to polynomial time by considering only a finite number of averages at each node in the binomial tree and which at the same time introduces only a small additional error, which is of the order of the difference between the exact binomial price and the Black-Scholes price.