A fast, accurate, and simple method for pricing European-Asian and saving-Asian options

Ken'ichiro Ohta, Kunihiko Sadakane, Akiyoshi Shioura, Takeshi Tokuyama

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We propose an efficient and accurate randomized approximation algorithm for computing the price of European-Asian options. Our algorithm can be seen as a modification of the approximation algorithm developed by Aingworth et al. (2000) into a randomized algorithm, which improves the accuracy theoretically as well as practically. We also propose a new option named the Saving-Asian option which enjoys advantages of both the European-Asian and American-Asian options. It is shown that our approximation algorithm also works for pricing Saving-Asian options.

Original languageEnglish
Pages (from-to)141-158
Number of pages18
JournalAlgorithmica (New York)
Volume42
Issue number2
DOIs
Publication statusPublished - 2005 Apr 1

Keywords

  • Approximation algorithm
  • Asian option
  • Binomial tree model
  • Option pricing
  • Randomized algorithm

ASJC Scopus subject areas

  • Computer Science(all)
  • Computer Science Applications
  • Applied Mathematics

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