A Recursive Method for Discretely Monitored Geometric Asian Option Prices

Abstract

Abstract. We aim to compute discretely monitored geometric Asian option prices under the Heston model. This method involves explicit formula for multivariate generalized Fourier transform of volatility process and their integrals over different time intervals using a recursive method. As numerical results, we illustrate efficiency and accuracy of our method. In addition, we simulate scenarios which show evidently practical importance of our work.

Pricing Asian options of discretely monitored geometric average in the regime‐switching model

“…Černý and Kyriakou proposed an efficient pricing method for arithmetic and geometric Asian options under exponential Lévy processes. Kim and Wee and Kim et al , proposed explicit solutions for the price of the continuous and discrete time geometric Asian option under the Heston stochastic volatility model.…”

“…Hubaleka and Sgarra [14] provided a semiexplicit valuation formula for geometric Asian options when the underlying stock price process exhibits both stochastic volatility and jumps.Černý and Kyriakou [15] proposed an efficient pricing method for arithmetic and geometric Asian options under exponential Lévy processes. Kim and Wee [16] and Kim et al [17] proposed explicit solutions for the price of the continuous and discrete time geometric Asian option under the Heston stochastic volatility model. This paper will focus on discretely monitored geometric Asian options in a regime-switching model.…”