Arithmetic Asian Options under Stochastic Delay Models |
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Authors: | Nairn McWilliams |
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Affiliation: | Maxwell Institute for Mathematical Sciences and School of Mathematics, University of Edinburgh , Edinburgh, EH9 3JZ, UK |
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Abstract: | Abstract Motivated by the increasing interest in past-dependent asset pricing models, shown in recent years by market practitioners and prominent authors such as Hobson and Rogers (1998 Hobson, D. and Rogers, L. C. G. 1998. Complete models with stochastic volatility. Mathematical Finance, 8(1): 27–48. [Google Scholar], Complete models with stochastic volatility, Mathematical Finance, 8(1), pp. 27–48), we explore option pricing techniques for arithmetic Asian options under a stochastic delay differential equation approach. We obtain explicit closed-form expressions for a number of lower and upper bounds and compare their accuracy numerically. |
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Keywords: | Stochastic delay differential equations derivative pricing arithmetic Asian options comonotonicity |
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