Pricing of Asian-type and Basket Options via Upper and Lower Bounds

Alexander Novikov, Scott Alexander, Nino Kordzakhia and Timothy Ling

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Abstract: This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in cases under discussion lower bounds allow for the dimensionality of the problem to be reduced and that these methods provide reasonable approximations to the price of the option. Keywords: Asian options, Basket options, Lower and Upper bounds, Volume-weighted average prices (VWAP), Levy processes.

Date: 2016-12
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1612.08767

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