Pricing American Asian Options with the Singular-Points Trinomial Method
Date Issued
2014
Date
2014
Author(s)
Liu, Chun
Abstract
Asian option is a path-dependent option whose payoff is based on the arithmetic averaging of the underlying asset price over the life of the option. Most American path-dependent options do not admit of closed-form analytical formulas for their option values, or, if they do, the formulas are complex. In practice, numerical methods are used to approximate the option value. In 2010, Gaudenzi, Zanette and Lepellere proposed a new method called the singular-points binomial method to price American path-dependent options efficiently. It is based on the binomial tree. In this thesis, we focus on pricing American Asian options. We establish a trinomial tree that adds a flat move to the binomial tree in every time step. Moreover, we apply the singular-points method into trinomial tree. The idea is to use the singular points to depict the relation between the average price and payoff of any node in the tree. The method is more efficient than existing methods. The convergence behavior is also better than the method of Gaudenzi, Zanette and Lepellere (2010).
Subjects
樹狀模型
三元樹
亞式選擇權
路徑相依
奇異點
Type
thesis
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