Path Integral and Asian Options

Peng Zhang

Papers from arXiv.org

Abstract: In this paper we analytically study the problem of pricing an arithmetically averaged Asian option in the path integral formalism. By a trick about the Dirac delta function, the measure of the path integral is defined by an effective action functional whose potential term is an exponential function. This path integral is evaluated by use of the Feynman-Kac theorem. After working out some auxiliary integrations involving Bessel and Whittaker functions, we arrive at the spectral expansion for the value of Asian options.

Date: 2010-08, Revised 2013-11
New Economics Papers: this item is included in nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1008.4841

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