Asian Basket Spread Options: A New Approximation Based on Stochastic Taylor Expansions

Fabien Le Floc'h

Papers from arXiv.org

Abstract: We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be highly accurate for Asian and spread options in practice. Unlike other approaches, they do not require any numerical integration or root solving.

Date: 2025-04, Revised 2025-04
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