Pricing Bounds on Asian Options

J. Aase Nielsen and Klaus Sandmann

Journal of Financial and Quantitative Analysis, 2003, vol. 38, issue 2, 449-473

Abstract: This paper aims to develop and compare bounds on the pricing formulas for European type discrete Asian options. The lower bound is found by conditioning the maturity payment of the Asian option by the geometric average and the bound derived can be expressed as a portfolio of delayed payment European call options. Several exercise price-dependent upper bounds are derived. Like the lower bound, one of the upper bounds is expressed as a portfolio of delayed payment European call options. Through a numerical analysis, we conclude that more information is gained from the readily calculated bounds than from the usually applied pricing approximations. From the closed-form solutions of the bounds, hedging positions are finally derived.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

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:cup:jfinqa:v:38:y:2003:i:02:p:449-473_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().