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Questions tagged [asian-option]

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4
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1answer
30 views

Monte Carlo for Asian Pricing

I'm trying to verify the accuracy of my Monte Carlo method for pricing mean options. I came across this paper that supposedly gives an 'exact' solution for the arithmetic mean option (asian). It's a ...
2
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0answers
24 views

American-Bermudan-Asian option fixed strike using finite differences

I'm trying to price the same American-Bermudan-Asian option described in Longstaff Schwartz (2001). Specifically, using finite difference methods with an explicit scheme to solve $\begin{aligned} \...
3
votes
1answer
69 views

Pricing an Asian style forward contract with early exercise feature

Is there an analytic way to price or approximate a contract with payout $A_t - K$, where $A_t$ is the running average price of the underlying asset from $[0, t]$ and $K$ is (fixed) strike. If this ...
1
vote
1answer
48 views

Pricing American style Asian option

Is there any approximation of American style Asian option (with strike equal to the running averaging from 0 to $t$) pricing based on analytical closed form formula? I see the price difference ...
0
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3answers
91 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 ...
1
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0answers
14 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 ...
1
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0answers
33 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 ...
1
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0answers
102 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 }...
0
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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
1
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0answers
77 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 ...
0
votes
0answers
125 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 ...
1
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0answers
51 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 ...
0
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1answer
99 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?
1
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0answers
297 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
votes
1answer
534 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
votes
1answer
123 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 ?
-3
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1answer
1k views

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 ...
1
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0answers
139 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
votes
1answer
302 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
votes
3answers
3k 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 + ...
1
vote
1answer
278 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.
1
vote
1answer
274 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 ...
3
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0answers
127 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
307 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
votes
1answer
221 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 $A_T$ ...
5
votes
3answers
301 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
votes
1answer
322 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 ...
1
vote
0answers
553 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., ...
5
votes
1answer
431 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\...
3
votes
2answers
199 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
votes
1answer
382 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
votes
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 ...