A Quick Algorithm for Pricing European Average Options

Stuart M. Turnbull and Lee Macdonald Wakeman

Journal of Financial and Quantitative Analysis, 1991, vol. 26, issue 3, 377-389

Abstract: An algorithm is described that prices European average options. The algorithm is tested against Monte Carlo estimates and is shown to be accurate. The speed of the algorithm is comparable to the Black-Scholes algorithm. A closed-form solution is derived for European geometric average options.

Date: 1991
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