Asian-barrier options for an uncertain stock model with floating interest rate

Lifen Jia, Linya Zhang and Xueyong Liu

Communications in Statistics - Theory and Methods, 2025, vol. 54, issue 18, 5881-5904

Abstract: The Asian-barrier option is an effective hedging instrument that depends on the price correlation between the underlying asset and a predefined threshold over a specified date. This article initially investigates the pricing issues of two types of Asian knock-in options for Liu’s stock model with floating interest rates. Corresponding numerical algorithms are also designed for option evaluation. Subsequently, financial market data are analyzed to estimate the model’s parameters using moment estimation based on the residuals. Uncertain hypothesis test is conducted to assess the effectiveness of the fitted model. Finally, the results are validated through numerical experiments. It is noteworthy that a paradox related to the stochastic differential equation is discussed in Appendix A.

Date: 2025
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DOI: 10.1080/03610926.2024.2447831

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