Application of high-precision computing for pricing arithmetic asian options
Proceedings of the 2006 international symposium on Symbolic and algebraic computation
50th ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications
Management Science
Pricing American Asian options with higher moments in the underlying distribution
Journal of Computational and Applied Mathematics
High-order approximation of Pearson diffusion processes
Journal of Computational and Applied Mathematics
Pricing Asian Options Under a Hyper-Exponential Jump Diffusion Model
Operations Research
Approximations for Asian options in local volatility models
Journal of Computational and Applied Mathematics
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Arithmetic Asian or average price options deliver payoffs based on the average underlying price over a prespecified time period. Asian options are an important family of derivative contracts with a wide variety of applications in currency, equity, interest rate, commodity, energy, and insurance markets. We derive two analytical formulas for the value of the continuously sampled arithmetic Asian option when the underlying asset price follows geometric Brownian motion. We use an identity in law between the integral of geometric Brownian motion over a finite time interval [0,t] and the state at timet of a one-dimensional diffusion process with affine drift and linear diffusion and express Asian option values in terms of spectral expansions associated with the diffusion infinitesimal generator. The first formula is an infinite series of terms involving Whittaker functionsM andW. The second formula is a single real integral of an expression involving Whittaker functionW plus (for some parameter values) a finite number of additional terms involving incomplete gamma functions and Laguerre polynomials. The two formulas allow accurate computation of continuously sampled arithmetic Asian option prices.