Pricing and hedging Asian basket spread options

DOI10.1016/J.CAM.2009.11.027MaRDI QIDQ848538zbMATH OpenOpenAlexFDO

Authors Griselda Deelstra, Alexandre Petkovic, Michèle Vanmaele

Publication date 4 March 2010

Published in Journal of Computational and Applied Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.cam.2009.11.027

zbMATH Keywords

Asian basket spread optionmoment matchingnon-comonotonic sumshifted log-extended skew normal law

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

This paper is devoted to the problem of pricing general Asian basket spread options. Prices and Greeks are obtained in short computation time. There are developed approximation formulae based on comonotonicity theory and moment matching methods. The authors compare their relative performances and explain how to choose the best approximation technique as a function of the Asian basket spread characteristics. For the proposed methods Greeks are given explicitly. The obtained results are extended to the case of options denominated in foreign currency.

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Cites work

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Cited in

(12)

• Pricing and hedging Asian basket options with quasi-Monte Carlo simulations
• Density estimates and short-time asymptotics for a hypoelliptic diffusion process
• Pricing of spread and exchange options in a rough jump-diffusion market
• Pricing and risk management of interest rate swaps
• The hedging strategy of an Asian option
• Quantile hedging for basket derivatives
• Multi-asset spread option pricing and hedging
• General closed-form basket option pricing bounds
• The pricing of basket-spread options
• Closed-form approximations for spread options in Lévy markets
• Bounds for Asian basket options
• Moment matching approximation of Asian basket option prices

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