Asian Basket Option Pricing by a Simple Binomial Tree
Date Issued
2014
Date
2014
Author(s)
Chan, Yi-Chi
Abstract
Asian basket option is hard to price. This thesis presents a new approach to price European-style and American-style Asian basket options. First, we use approximation and moment-matching techniques to find the random variable following the shifted lognormal distribution to approximate the basket value. Second, we use the random variable to build a binomial tree and combine it with the Hull-White methodology for pricing path-dependent options to price Asian basket options. Finally, we compare our numerical results with Monte Carlo simulation for European-style Asian basket options and with the least-squares Monte Carlo for American-style ones. They show that the European-style Asian basket option prices obtained by our approach are accurate and the American-style ones are overpriced by our approach.
Subjects
亞式一籃子選擇權
平移對數常態分佈
動差擬合
封閉解
Hull-White法
Type
thesis
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