Arithmetic Asian Options under Stochastic Delay Models

Nairn McWilliams and Sotirios Sabanis

Applied Mathematical Finance, 2011, vol. 18, issue 5, 423-446

Abstract: Motivated by the increasing interest in past-dependent asset pricing models, shown in recent years by market practitioners and prominent authors such as Hobson and Rogers (1998, Complete models with stochastic volatility, Mathematical Finance, 8(1), pp. 27--48), we explore option pricing techniques for arithmetic Asian options under a stochastic delay differential equation approach. We obtain explicit closed-form expressions for a number of lower and upper bounds and compare their accuracy numerically.

Date: 2011
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DOI: 10.1080/1350486X.2011.567119

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