Efficiently pricing European-Asian options - Ultimate implementation and analysis of the AMO algorithm

Akiyoshi Shioura, Takeshi Tokuyama

Research output: Contribution to journalConference articlepeer-review

Abstract

We propose an efficient and accurate randomized approximation algorithm for pricing a European-Asian option on the binomial tree model. For an option with the strike price X on an n-step binomial tree and any positive integer k, our algorithm runs in O(kn2) time with the error bound O(X/k) which is independent of n. Our algorithm is a modification of the approximation algorithm developed by Aingworth, Motwani, and Oldham (2000) into a randomized algorithm, which improves the accuracy theoretically as well as practically.

Original languageEnglish
Pages (from-to)291-300
Number of pages10
JournalLecture Notes in Computer Science
Volume3521
Publication statusPublished - 2005 Sep 30
EventFirst International Conference on Algorithmic Applications in Management, AAIM 2005 - Xian, China
Duration: 2005 Jun 222005 Jun 25

ASJC Scopus subject areas

  • Theoretical Computer Science
  • Computer Science(all)

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