Critical value-based Asian option pricing model for uncertain financial markets

Ziqiang Lu, Yuanguo Zhu and Bo Li

Physica A: Statistical Mechanics and its Applications, 2019, vol. 525, issue C, 694-703

Abstract: Asian option has become one of the most popular financial derivatives in the OTC (Over-the-Counter) market due to its low risk and cost. The option pricing problem which regards the price of the underlying asset as a random variable has been extensively studied based on the sufficient historical data. It may be modeled as an uncertain variable when the historical data is lack. This paper investigates the Asian option pricing problem based on uncertainty theory, in which the price of the underlying asset follows the mean-reverting process involving an uncertain fractional differential equation. The pricing formulas of the Asian options are derived based on the expected value and optimistic value. Some numerical experiments are performed to illustrate the results.

Keywords: Uncertainty theory; Fractional differential equation; Asian option; Expected value; Optimistic value (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437119303863
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

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:eee:phsmap:v:525:y:2019:i:c:p:694-703

DOI: 10.1016/j.physa.2019.04.022

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().