Accurate closed‐form approximation for pricing Asian and basket options |
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| Authors: | Jinke Zhou Xiaolu Wang |
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| Institution: | 1. Chern Institute of Mathematics, Nankai University, Tianjin, People's Republic of China;2. Shenzhen Financial Engineering College of Nankai University, Shenzhen, People's Republic of China |
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| Abstract: | By approximating the distribution of the sum of correlated lognormals with some log‐extended‐skew‐normal distribution, we present closed‐form approximation formulae for pricing both Asian and basket options. Numerical comparison shows that our formulae provide both computational simplicity and accuracy. Copyright © 2008 John Wiley & Sons, Ltd. |
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| Keywords: | log‐extended‐skew‐normal Asian option basket option |
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