Pricing of Asian-type and basket options via bounds

DOI10.1137/S0040585X97T987995zbMATH Open1358.91100arXiv1612.08767MaRDI QIDQ2967982FDOQ2967982

Authors:

Publication date: 9 March 2017

Published in: Theory of Probability & Its Applications (Search for Journal in Brave)

Abstract: This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in cases under discussion lower bounds allow for the dimensionality of the problem to be reduced and that these methods provide reasonable approximations to the price of the option. Keywords: Asian options, Basket options, Lower and Upper bounds, Volume-weighted average prices (VWAP), Levy processes.

Full work available at URL: https://arxiv.org/abs/1612.08767

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• Bounds for Asian basket options
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zbMATH Keywords

basket optionslower and upper boundsAsian optionsvolume-weighted average prices (VWAP)Lévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60)

Cites Work

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• General Lower Bounds for Arithmetic Asian Option Prices
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• A MOMENT MATCHING APPROACH TO THE VALUATION OF A VOLUME WEIGHTED AVERAGE PRICE OPTION
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• Bounds on prices for Asian options via Fourier methods
• Robust Approximations for Pricing Asian Options and Volatility Swaps Under Stochastic Volatility
• An extension of the chaos expansion approximation for the pricing of exotic basket options
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Cited In (8)

• The pricing of basket options: a weak convergence approach
• Sharp Upper and Lower Bounds for Basket Options
• Accurate closed-form approximation for pricing Asian and basket options
• Pricing and hedging Asian basket options with quasi-Monte Carlo simulations
• Lower and upper bounds for prices of Asian-type options
• Static-arbitrage upper bounds for the prices of basket options
• Pricing bounds and approximations for discrete arithmetic Asian options under time-changed Lévy processes
• Bounds for Asian basket options

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