Accurate closed‐form approximation for pricing Asian and basket options

Jinke Zhou and Xiaolu Wang

Applied Stochastic Models in Business and Industry, 2008, vol. 24, issue 4, 343-358

Abstract: By approximating the distribution of the sum of correlated lognormals with some log‐extended‐skew‐normal distribution, we present closed‐form approximation formulae for pricing both Asian and basket options. Numerical comparison shows that our formulae provide both computational simplicity and accuracy. Copyright © 2008 John Wiley & Sons, Ltd.

Date: 2008
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https://doi.org/10.1002/asmb.714

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Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmbi:v:24:y:2008:i:4:p:343-358

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