The valuation of path dependent contracts on the average
Management Science
Estimating security price derivatives using simulation
Management Science
Accurate approximations for Asian options
SODA '00 Proceedings of the eleventh annual ACM-SIAM symposium on Discrete algorithms
Financial engineering and computation: principles, mathematics, and algorithms
Financial engineering and computation: principles, mathematics, and algorithms
Modelling Financial Derivatives with Mathematica
Modelling Financial Derivatives with Mathematica
An Ingenious, Piecewise Linear Interpolation Algorithm for Pricing Arithmetic Average Options
AAIM '07 Proceedings of the 3rd international conference on Algorithmic Aspects in Information and Management
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Asian options are path-dependent derivatives. How to price them efficiently and accurately has been a long-standing research and practical problem. Asian options can be priced on the lattice. But only exponential-time algorithms are currently known if such options are to be priced on a lattice without approximation. Although efficient approximation methods are available, most of them lack accuracy guarantees. This paper proposes a novel lattice for pricing Asian options. The resulting exact pricing algorithm runs in subexponential time. This is the first exact lattice algorithm to break the exponential-time barrier. Because this lattice converges to the continuous-time stock price process, the proposed algorithm is guaranteed to converge to the desired continuous-time option value.