Asian Options Pricing: a Joint Density Approach

Although there already has many studies concerning with the pricing of Asian options in the literature, there still has some problems not being solved. First, the risk-neutral distribution of the average price under Black-Scholes model is still unclear. Second, the accuracy of average strike Asian options pricing still have some space to improve. Third, a more accurate solution for a complex Asian option, such as Quanto Asian options or a stochastic interest rate Asian option, is desired. The objective of this three-year project is to propose an accuracy and easy-use pricing method. This involves the obtaining of the risk-neutral distribution of the average price, the pricing of average strike options, and the pricing of Quanto Asian options. The methodology we use to solve these problems comes from Zhang (2001) and Zhang (2003). However, one should notice that the basic idea of our pricing method is not to use Zhang (2001) and Zhang’s (2003) “methods” to price average strike and other complex Asian options, in contrary, we use their “results” to price those options.

Project ID:PF10107-1666
External Project ID:NSC101-2410-H182-013-MY3