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- Title
AN EFFICIENT BINOMIAL METHOD FOR PRICING ASIAN OPTIONS.
- Authors
Kyoung-Sook Moon; Yunju Jeong; Hongjoong Kim
- Abstract
We construct an efficient tree method for pricing pathdependent Asian options. The standard tree method estimates option prices at each node of the tree, while the proposed method defines an interval about each node along the stock price axis and estimates the average option price over each interval. The proposed method can be used independently to construct a new tree method, or it can be combined with other existing tree methods to improve the accuracy. Numerical results show that the proposed schemes show superiority in accuracy to other tree methods when applied to discrete forward-starting Asian options and continuous European or American Asian options.
- Subjects
BINOMIAL theorem; EFFICIENT market theory; MARKET pricing; STOCK price indexes; RANDOM forest algorithms
- Publication
Economic Computation & Economic Cybernetics Studies & Research, 2016, Vol 50, Issue 2, p151
- ISSN
0424-267X
- Publication type
Article