An asymptotic expansion method for geometric Asian options pricing under the double Heston model

Sumei Zhang and Xiong Gao

Chaos, Solitons & Fractals, 2019, vol. 127, issue C, 1-9

Abstract: The purpose of the paper is to provide an efficient method for the continuously monitored geometric Asian options under the double Heston model. By introducing two small parameters, we slightly modify the double Heston model. With singular and regular perturbation techniques, we derive the first-order asymptotic expansions for pricing geometric Asian options with fixed and floating strikes and provide the convergence of the asymptotic formulae. We also provide the Greeks of geometric Asian options. Numerical results verify the efficiency of the pricing method. We calibrate the modified model to real markets and examine the impacts of two-factor volatilities on geometric Asian option prices.

Keywords: Geometric Asian option; Option pricing; Asymptotic expansion; Perturbation technique; Stochastic volatility (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:127:y:2019:i:c:p:1-9

DOI: 10.1016/j.chaos.2019.06.021

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