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The value of an Asian option

Published online by Cambridge University Press:  14 July 2016

L. C. G. Rogers*
Queen Mary and Westfield College, University of London
Z. Shi*
Queen Mary and Westfield College, University of London
Present address: School of Mathematical Sciences, Claverton Down, Bath BA2 7AY, UK.
∗∗Present address: LSTA, Université Paris VI, 4 Place Jussieu, F-75252 Paris Cedex 05, France.


This paper approaches the problem of computing the price of an Asian option in two different ways. Firstly, exploiting a scaling property, we reduce the problem to the problem of solving a parabolic PDE in two variables. Secondly, we provide a lower bound which is so accurate that it is essentially the true price.

Research Papers
Copyright © Applied Probability Trust 1995 

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Research supported by SERC grant number GR/H 00444.


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