Bessel Processes and Asian Options

Daniel Dufresne

Chapter Chapter 2 in Numerical Methods in Finance, 2005, pp 35-57 from Springer

Abstract: Abstract The goal of this chapter is to give a concise account of the connection between Bessel processes and the integral of geometric Brownian motion. The latter appears in the pricing of Asian options. Bessel processes are defined and some of their properties are given. The known expressions for the probability density function of the integral of geometric Brownian motion are stated, and other related results are given, in particular the Geman and Yor (1993) Laplace transform for Asian option prices.

Keywords: Brownian Motion; Geometric Brownian Motion; Asian Option; Bessel Process; Unique Strong Solution (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/0-387-25118-9_2

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