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Efficient quadratic approximation of floating strike Asian option values

Research output: Working paper

Published

Standard

Efficient quadratic approximation of floating strike Asian option values. / Chung, S L; Shackleton, M B; Wojakowski, R M.
Lancaster University: The Department of Accounting and Finance, 2000. (Accounting and Finance Working Paper Series).

Research output: Working paper

Harvard

Chung, SL, Shackleton, MB & Wojakowski, RM 2000 'Efficient quadratic approximation of floating strike Asian option values' Accounting and Finance Working Paper Series, The Department of Accounting and Finance, Lancaster University.

APA

Chung, S. L., Shackleton, M. B., & Wojakowski, R. M. (2000). Efficient quadratic approximation of floating strike Asian option values. (Accounting and Finance Working Paper Series). The Department of Accounting and Finance.

Vancouver

Chung SL, Shackleton MB, Wojakowski RM. Efficient quadratic approximation of floating strike Asian option values. Lancaster University: The Department of Accounting and Finance. 2000. (Accounting and Finance Working Paper Series).

Author

Chung, S L ; Shackleton, M B ; Wojakowski, R M. / Efficient quadratic approximation of floating strike Asian option values. Lancaster University : The Department of Accounting and Finance, 2000. (Accounting and Finance Working Paper Series).

Bibtex

@techreport{4d3afc6138a4408da68424384287780e,
title = "Efficient quadratic approximation of floating strike Asian option values",
abstract = "Asian option pricing is difficult because the underlying average does not have a well known distribution. For large averaging times, the distribution and option price do have known limiting forms but perversely, Asian options are more difficult to price the shorter and less volatile the situation. Moreover floating strike options are more difficult to price than fixed strike because a joint distribution is required in the former. In this paper we provide an efficient method for floating strike options that works well for the low and medium volatility as well a finite maturity cases, because the method is based on the first few terms only of a series expansion of the underlying variable in volatility. As well as complementing other numerical techniques our method is fast and efficient compared to the Monte Carlo benchmark method adopted.",
keywords = "Floating strike, Asian option pricing, Arithmetic average, Distribution, Series expansion, Volatility",
author = "Chung, {S L} and Shackleton, {M B} and Wojakowski, {R M}",
year = "2000",
language = "English",
series = "Accounting and Finance Working Paper Series",
publisher = "The Department of Accounting and Finance",
type = "WorkingPaper",
institution = "The Department of Accounting and Finance",

}

RIS

TY - UNPB

T1 - Efficient quadratic approximation of floating strike Asian option values

AU - Chung, S L

AU - Shackleton, M B

AU - Wojakowski, R M

PY - 2000

Y1 - 2000

N2 - Asian option pricing is difficult because the underlying average does not have a well known distribution. For large averaging times, the distribution and option price do have known limiting forms but perversely, Asian options are more difficult to price the shorter and less volatile the situation. Moreover floating strike options are more difficult to price than fixed strike because a joint distribution is required in the former. In this paper we provide an efficient method for floating strike options that works well for the low and medium volatility as well a finite maturity cases, because the method is based on the first few terms only of a series expansion of the underlying variable in volatility. As well as complementing other numerical techniques our method is fast and efficient compared to the Monte Carlo benchmark method adopted.

AB - Asian option pricing is difficult because the underlying average does not have a well known distribution. For large averaging times, the distribution and option price do have known limiting forms but perversely, Asian options are more difficult to price the shorter and less volatile the situation. Moreover floating strike options are more difficult to price than fixed strike because a joint distribution is required in the former. In this paper we provide an efficient method for floating strike options that works well for the low and medium volatility as well a finite maturity cases, because the method is based on the first few terms only of a series expansion of the underlying variable in volatility. As well as complementing other numerical techniques our method is fast and efficient compared to the Monte Carlo benchmark method adopted.

KW - Floating strike

KW - Asian option pricing

KW - Arithmetic average

KW - Distribution

KW - Series expansion

KW - Volatility

M3 - Working paper

T3 - Accounting and Finance Working Paper Series

BT - Efficient quadratic approximation of floating strike Asian option values

PB - The Department of Accounting and Finance

CY - Lancaster University

ER -