Asian options and meromorphic Lévy processes

D. Hackmann () and A. Kuznetsov ()

Finance and Stochastics, 2014, vol. 18, issue 4, 825-844

Abstract: One method to compute the price of an arithmetic Asian option in a Lévy driven model is based on an exponential functional of the underlying Lévy process: If we know the distribution of the exponential functional, we can calculate the price of the Asian option via the inverse Laplace transform. In this paper, we consider pricing Asian options in a model driven by a general meromorphic Lévy process. We prove that the exponential functional is equal in distribution to an infinite product of independent beta random variables, and its Mellin transform can be expressed as an infinite product of gamma functions. We show that these results lead to an efficient algorithm for computing the price of the Asian option via the inverse Mellin–Laplace transform, and we compare this method with some other techniques. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Asian option; Meromorphic process; Hyper-exponential process; Exponential functional; Mellin transform; Gamma function; 60G51; 65C50; C63 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s00780-014-0237-8

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