Abstract
Semidefinite programming (SDP) approaches are considered for obtaining bounds for the price of an arithmetic average Asian option. A method for computing the moments of the distribution of prices is developed which enables the method of Bertsimas and Popescu to be extended for the case of the Asian option. In particular, several SDP formulations for upper and lower bounds of the price of an Asian option are given based on different representations of the payoffs of the option. The formulations are amenable to standard SDP computational methods.
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Dalakouras, G.V., Kwon, R.H., Pardalos, P.M. (2008). Semidefinite Programming Approaches for Bounding Asian Option Prices. In: Kontoghiorghes, E.J., Rustem, B., Winker, P. (eds) Computational Methods in Financial Engineering. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-77958-2_6
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DOI: https://doi.org/10.1007/978-3-540-77958-2_6
Publisher Name: Springer, Berlin, Heidelberg
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