Black-Scholes formulae for Asian options in local volatility models

Paolo Foschi, Stefano Pagliarani () and Andrea Pascucci
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Stefano Pagliarani: Università di Padova

No 7, Quaderni di Dipartimento from Department of Statistics, University of Bologna

Abstract: We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.

Keywords: Asian Options; Degenerate Diffusion Processes; Transition Density Functions; Analytic Approximations; Option Pricing (search for similar items in EconPapers)
Pages: 29
Date: 2011
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Citations: View citations in EconPapers (6)

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