Stochastic Expansion for the Pricing of Asian and Basket Options
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arXiv
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| Format: | Preprint |
| Publié: |
2024
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| _version_ | 1866916351900123136 |
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| author | Floc'h, Fabien Le |
| author_facet | Floc'h, Fabien Le |
| contents | We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be highly accurate for Asian options in practice as well as for vanilla options with discrete dividends. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2402_17684 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Stochastic Expansion for the Pricing of Asian and Basket Options Floc'h, Fabien Le Pricing of Securities Computational Finance Mathematical Finance We present closed analytical approximations for the pricing of basket options, also applicable to Asian options with discrete averaging under the Black-Scholes model with time-dependent parameters. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be highly accurate for Asian options in practice as well as for vanilla options with discrete dividends. |
| title | Stochastic Expansion for the Pricing of Asian and Basket Options |
| topic | Pricing of Securities Computational Finance Mathematical Finance |
| url | https://arxiv.org/abs/2402.17684 |