Asia-Pacific Financial Markets

, Volume 12, Issue 4, pp 289–306 | Cite as

On the asymptotic behavior of the prices of Asian options

Original Paper

Abstract

In this paper, we study the price of a long term Asian option the pay-off of which is determined by the average price of the underlying asset during the last fixed number of days of its life. As one can imagine, it converges to the price of a plain vanilla option as the time to maturity increases. We explicitly obtained the asymptotic difference which will be useful for computing the price of Asian option in practice.

Keywords

Asian option Asymptotic behavior 

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References

  1. Akahori, J., Yasutomi, K., & Yokota, T. (2005). Backwardation in Asian option prices. International Journal of Innovative Computing, Information and Control, 1(3), 581 – 593.Google Scholar
  2. Akahori, J., Mikami, T., Yasutomi, K., & Yokota, T. (2004). Term structure of prices of Asian options. Research Paper Series NO.04004. Research Center for Finance, Ritsumeikan University.Google Scholar
  3. Bouleau, N., & Lepingle, D. (1994). Numerical methods for stochastic processes. John Wiley & Sons, Inc.: A Wiley-Interscience Publication.Google Scholar
  4. Yor, M. (2001). Exponential functionals of Brownian motion and related processes. Springer-Verlag.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Fixed Income Trading Department, Fixed Income GroupMizuho Securities Co., Ltd.TokyoJapan
  2. 2.Department of Mathematical SciencesRitsumeikan UniversityShigaJapan

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