An Accurate and Efficient Method for Pricing Asian Options

25 Pages Posted: 11 May 2003

See all articles by Chuang-Chang Chang

Chuang-Chang Chang

National Central University - Department of Finance

Chueh-Yung Tsao

National Central University - Department of Finance

Date Written: January 14, 2003

Abstract

In this paper we provide an accurate and efficient method for valuing Asian options that works well for the low and medium volatility as well as longer average time window. Numerical results show that our method significantly outperforms the other analytic approximation methods in the literature. The pricing errors in terms of mean square errors for calculating a bundle of Asian options are less than one percent. Our method is fast and efficient compared to the Monte Carlo benchmark method adopted as well.

Keywords: Analytic approximation Methods, Asian options, Monte Carlo

JEL Classification: G13

Suggested Citation

Chang, Chuang-Chang and Tsao, Chueh-Yung, An Accurate and Efficient Method for Pricing Asian Options (January 14, 2003). Available at SSRN: https://ssrn.com/abstract=392020 or http://dx.doi.org/10.2139/ssrn.392020

Chuang-Chang Chang (Contact Author)

National Central University - Department of Finance ( email )

No. 300, Jhongda Rd, Jhogli City, Taoyuan, Taiwan,
Jhongli, TY 32001
Taiwan
886-3-4227151 ext. 6159 (Phone)
886-3-4252961 (Fax)

Chueh-Yung Tsao

National Central University - Department of Finance ( email )

No. 300, Jhongda Rd, Jhogli City, Taoyuan, Taiwan,
Jhongli, TY 32001
Taiwan
886-3-4227151ext.6259 (Phone)
886-3-4252961 or 0946786163 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
487
Abstract Views
2,073
Rank
107,399
PlumX Metrics