LAGUERRE SERIES IN CONTINGENT CLAIM VALUATION, WITH APPLICATIONS TO ASIAN OPTIONS

Michael Schröder

Mathematical Finance, 2005, vol. 15, issue 3, 491-531

Abstract: This paper pursues the role of Laguerre series in the explicit valuation of contingent claims in general and Asian options in particular. Motivated by Dufresne (2000), we study how they permit one to reduce these questions to computing moments. Two alternative such Laguerre reduction approaches are proposed and analyzed. Sufficient conditions for their validity are developed as a further novel feature; these are in terms of local growth measures for the payoff functions and the densities that the paper introduces for this purpose. Our methods are exemplified by considering the benchmark valuation of Asian options. Our explicit formulas for the negative moments of the integral of geometric Brownian motion in terms of theta functions are instrumental here. They have been derived in Schröder (2003c) building on work of Dufresne (2000), and this paper now finally develops their pertinent computational aspects.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/j.1467-9965.2005.00230.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:mathfi:v:15:y:2005:i:3:p:491-531

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0960-1627

Access Statistics for this article

Mathematical Finance is currently edited by Jerome Detemple

More articles in Mathematical Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().