# Negative adjusted strike in Levy's Asian option approximation?

In Edmond Levy's 1992 paper, he introduced a moment-matching method to approximate the price of an Asian option assuming GBM for the underlying.

It suggested that, if some monitor points are already observed, and the average of these points are $A$, then in the pricing formula, the strike is adjusted to $K^*=K-\frac{m+1}{N+1}A$, where $m+1$ is the number of points observed, and $N+1$ is the total number of monitor points.

However, it is possible that $K^*$ is below $0$, which causes trouble when we try to log them in $d_1$ and $d_2$. Is it the method's own limitless or did I do something wrong here?

• If $K*$ is below 0, you do not need to compute $d_1$ and $d_2$, as then there is no optionality. Oct 19 '15 at 19:08
• I would suggest that this question be closed, as the OP has never commented on any of the answers. That is, answers to this question do not appear to be needed. Apr 11 '17 at 13:06