On the Performance of the Comonotonicity Approach for Pricing Asian Options in Some Benchmark Models from Equities and Commodities

Jilong Chen () and Christian-Oliver Ewald
Additional contact information
Jilong Chen: International Institute for Financial Studies and RCFMRP, Jiangxi University of Finance and Economics, Nanchang 330013, Jiangxi Province, China

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2017, vol. 20, issue 01, 1-32

Abstract: In this paper, we investigate the applicability of the comonotonicity approach in the context of various benchmark models for equities and commodities. Instead of classical Lévy models as in Albrecher et al. we focus on the Heston stochastic volatility model, the constant elasticity of variance (CEV) model and Schwartz’ 1997 stochastic convenience yield model. We show how the technical difficulties of inverting the distribution function of the sum of the comonotonic random vector can be overcome and that the method delivers rather tight upper bounds for the prices of Asian Options in these models, at least for strikes which are not too large. As a by-product the method delivers super-hedging strategies which can be easily implemented.

Keywords: Asian options; commodities; hedging; risk management (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091517500059
Access to full text is restricted to subscribers

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:wsi:rpbfmp:v:20:y:2017:i:01:n:s0219091517500059

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091517500059

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().