Efficient and accurate quadratic approximation methods for pricing Asian strike options

NCUIR > School of Management at National Central University > Department of Finance > journal & Dissertation > Item 987654321/51707

Please use this identifier to cite or link to this item: http://ir.lib.ncu.edu.tw/handle/987654321/51707

Title:	Efficient and accurate quadratic approximation methods for pricing Asian strike options
Authors:	Chang,CC;Tsao,CY
Contributors:	財務金融學系
Keywords:	BOUNDS;PRICES
Date:	2011
Issue Date:	2012-03-27 19:03:18 (UTC+8)
Publisher:	國立中央大學
Abstract:	This study is on valuing Asian strike options and presents efficient and accurate quadratic approximation methods that work extremely well, both with regard to the volatility of a wide range of underlying assets, and longer average time windows. We demonstrate that most of the well-known quadratic approximation methods used in the literature for pricing Asian strike options are special cases of our model, with the numerical results demonstrating that our method significantly outperforms the other quadratic approximation methods examined here. Using our method for the calculation of hundreds of Asian strike options, the pricing errors (in terms of the root mean square errors) are reasonably small. Compared with the Monte Carlo benchmark method, our method is shown to be rapid and accurate. We further extend our method to the valuing of quanto forward-starting Asian strike options, with the pricing accuracy of these options being largely the same as the pricing of plain vanilla Asian strike options.
Relation:	QUANTITATIVE FINANCE
Appears in Collections:	[Department of Finance] journal & Dissertation

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