A New Approach to Pricing the Options on the Minumum or the Mazimum of Two Average Prices
A new approach is developed for computing the prices of European options on the minimum or the maximum of two average prices. The method is based on an observation that the price of an Asian option in some cases can become that of a vanilla European option. Therefore we can easily obtain the closed-form formula for the option with geometric averaging at any time before maturity. In particular, this method can be directly extended to obtain the closed-form solution for the price of the several average case. An approximated closed-form formula for the option with arithmetic averaging is derived by directly approximating the arithmetic average with the geometric average. Numerical evidence is given to show the accuracy and efficiency of the above approximated formula.
Huirong ZHAN Qiangsheng CHENG
School of International Business, Beijing Foreign Studies University, Beijing, China School of Mathematical Sciences, Peking University, Beijing, China
国际会议
The 7th Northeast Asia Management & Economy Joint Conference(第七届东北亚经济与管理论坛)
北京
英文
629-644
2008-10-25（万方平台首次上网日期，不代表论文的发表时间）