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Questions tagged [asian-option]

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3answers
69 views

Which stock tick has its geometric asian call?

Many finance books introduce the pricing on geometric asian call/put options underlying black-scholes model, since its price has its explicit formula. I am not sure, if geometric asian option is ...
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0answers
11 views

Asian basket option variance reduction control variates monte carlo

I have priced an Asian put option with three underlying correlated stocks. Now I want to try to reduce the variance using control variates. I have found great ideas when there is one underlying (thus ...
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0answers
29 views

Does the Asian Option (average Option) depend on the forward implied vol

I can easily understand that the forward starting Option and Barrier Option depend on the forward implied vol smile at resetting date, so we always choose the stochastic vol model for underlying to ...
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0answers
93 views

Compo Feature in Asian Option on Futures

I'm pricing an Asian option on futures using Turnbull–Wakeman (other suggestions welcome) where the average is defined as $A _ { t _ { 1 } , t _ { n } } ^ { A , f } = \frac { 1 } { n } \sum _ { i = 1 }...
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0answers
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How can I calculate Asian Option value when the averaging interval starts in the future?

So, actually the question is very straightforward. Say, at 01-Aug-2018 I bought an Asian Option with maturity at 01-Nov-2020. Averaging period is between 01-Aug-2020 - 01-Nov-2020. I would like to use ...
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0answers
20 views

Convention for Discrete Asian / Lookback Options

When computing the Payoff of Discrete Asian / Lookback Options (say 12 observations) using MC, does one usually use the value of S0 as well or only the latter realisations? Best regards, Alex
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0answers
68 views

Pricing a Path-Dependent Option with Heston

I want to price a path-dependent option (let's say for example an arithmetic average Asian option) under a Heston model. In a Black-Scholes setup, I use forward volatilities to do so. I want to apply ...
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0answers
102 views

calculating implied volatility of Asian Option

I am new to the site. I saw another similar question but I can't comment on it because of low rep. I wanted to know how the volatility of an Asian is calculated. I was thinking that a weighted ...
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0answers
49 views

Probability distributions as solutions to differential equations

As far as what I can tell, the popularity of the Black-Scholes-Merton model partly stems from the fact that it formulates the value of a derivative in a differential form in which the solution has a ...
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1answer
95 views

Asian Call Option

An Asian call option with the average strike payoff, uses the “averaging” to reduce the effect of volatility. Why is this so?
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0answers
269 views

Time integral of geometric brownian motion

Suppose $S_t$ is a geometric brownian motion. Then how to understand its time integral, i.e., $Y_t=\int_0^{t}S_udu$? Is $Y_t$ still a stochastic process? How to compute the expectation of $Y_t$? ...
2
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1answer
508 views

Wrong pricing of Asian Option

Issue short: I have values for Asian Options which I'm trying to replicate using a self-build vba calculator. The values I have to hit is from FinCAD and I'm using a discrete arithmetic average rate ...
2
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1answer
116 views

Is there any useful links for option pricing (american + asian + european) using R

I'm trying to evaluate option pricing mainly american, asian and european options in order to get a plot to measure option valuation in time. Is there any useful references to do that using R ?
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1answer
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Monte carlo simulation for arithmetic average price asian option [closed]

I am trying to construct a method in python that evaluates the value of an Arithmetic Asian Option using standard Monte Carlo simulation (without control variates). However, I am not getting the ...
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0answers
130 views

Pricing Asian option at discrete times

I hope you can help me again regarding pricing an arithmetic Asian option. Asumme we have a time grid $(0=t_0,t_1,t_2=T)$ and we buy an Asian option at time 0 and the maturity is at T. Now we would ...
4
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1answer
264 views

Simulation of the Vega in Heston model (for Asian Option)

I'm new here and I hope you guys can help me. I want to calculate/simulate the Vega for my Asian option in the Heston model. The only source I found is the paper of Broadie/Kaya (2004) but they just ...
5
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3answers
2k views

How to perform Monte-Carlo simulations to price Asian options?

If I wish to price a fixed-strike Asian Call option via Monte-Carlo (This has no early-exercise), are my following steps correct?: 1) Simulate random asset prices. (Milstein) $\ d S(t) = \ rS(t)dt + ...
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1answer
267 views

Asian option and option pricing

I know Asian option is defined as follow $$\left(\frac{1}{T}\int_{0}^{T}S_t dt-K\right)^+$$ Is there a good idea behind this definition. Thanks.
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1answer
262 views

Is Asian option in binomial asset pricing model a martingale?

Since it does not have a closed form solution for the price, it's unlikely to be a martingale. However, on the other hand, if we represent the price as a function of the current stock price and the ...
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0answers
126 views

Approximate asian geometric option with Heston

I am trying to implement Theorem 1 from this Journal in RStudio. The journal says the it is possible to find a approximate price of a geometric asian option in a Heston setup this way: $$X_{1cGAO}=e^{...
2
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1answer
300 views

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 ...
3
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1answer
186 views

Asian Option with Geometric Averaging

Can someone point me to any notes on how to derive the closed form formula for Asian geometric average option with payoff $\text{max}\left(\text{log}\left(\frac{A_T}{K}\right), 0\right)$ where $A_T$ ...
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3answers
286 views

Price of an asian option with squared of average payoff

Is there a closed form solution of the following price formula? Assuming $dS_t=rSdt+\sigma S_t dW_t$ under the Q dynamics $e^{-r(T-t)}\mathbb{E}_t^\mathcal{Q}[(\frac{(\int_0^T S_u du)}{T})^2]$ I ...
5
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1answer
309 views

What is the mechanism of Asian option?

I have no problem with the mathematical definition of an Asian option. For example, assume the strike price is $K$, the expiration date is $T$, the underlying asset has price $S(t)$, and the payoff is ...
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0answers
539 views

Asian option numerical pricing method generates a negative time value

I use R to write a function which simulates price path and calculates the value of an arithmetic Asian option. I found sometimes the value of the option can be lower than its intrinsic value, i.e., ...
4
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1answer
405 views

Boundary condition for Asian Option under Black-Scholes model

I am looking at Kemna and Vorst's paper: A PRICING METHOD FOR OPTIONS BASED ON AVERAGE ASSET VALUES. see http://www.javaquant.net/papers/Kemna-Vorst.pdf Let $\text{d}S_t = S_tr\text{d}t + S_t\sigma\...
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2answers
195 views

What information about the stochastic process is available from path-dependent options?

Assume the stock follows a process, which is defined by the following stochastic differential equation $$\frac{dS}{S}=r(t)dt+\sigma(S,t)dW,$$ so that the stock price process has local volatility. ...
5
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1answer
379 views

Covariance of brownian motion and its time average

It's a question pertaining to the correlation of a log asset process (following BM) and its time average, to put it into form, if $$X(t)=\mu t+\sigma W(t)$$ then $$ \bar{X}(t):=\frac{1}{t}\int_0^tX(...
3
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1answer
2k views

Implied Volatility for Asian option

I am new to the topic of Asian options. Assume I want to price an Asian put (fixed strike, discrete average) in the Black Scholes world. I know implementations to calculate the value but what is the ...