On Asian option pricing for NIG Lévy processes

Authors:
Hansjörg Albrecher;Martin Predota
Affiliations:
Graz University of Technology, Department of Mathematics, Steyrergasse 30, Graz 8010, Austria;Graz University of Technology, Department of Mathematics, Steyrergasse 30, Graz 8010, Austria
Venue:
Journal of Computational and Applied Mathematics
Year:
2004

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Abstract

In this paper, we derive approximations and bounds for the Esscher price of European-style arithmetic and geometric average options. The asset price process is assumed to be of exponential Lévy type with normal inverse Gaussian (NIG) distributed log-returns. Numerical illustrations of the accuracy of these bounds as well as approximations and comparisons of the NIG average option prices with the corresponding Black-Scholes prices are given.