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Erschienen in: Mathematics and Financial Economics 2/2020

18.01.2020

Short maturity conditional Asian options in local volatility models

verfasst von: Nian Yao, Zhichao Ling, Jieyu Zhang, Mingqing Xiao

Erschienen in: Mathematics and Financial Economics | Ausgabe 2/2020

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Abstract

In this paper, we study the option pricing problem for the conditional Asian option that appears as a recent market product, offering a cheaper and new alternative to the regular Asian option. We develop the new characteristics of short-maturity asymptotic for the prices of the conditional Asian option provided that the underlying asset follows a local volatility model. The asymptotics for out-of-the-money and at-the-money using fixed strike conditional Asian options are presented, respectively, which provide the linear approximation description of call/put option price. Moreover, the approximating solution for the corresponding variational problem under the well-known Black–Scholes model is also given. The theoretical results derived in the paper are practically relevant and numerical experiments are shown to validate the theoretical outcomes of the paper.

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Metadaten
Titel
Short maturity conditional Asian options in local volatility models
verfasst von
Nian Yao
Zhichao Ling
Jieyu Zhang
Mingqing Xiao
Publikationsdatum
18.01.2020
Verlag
Springer Berlin Heidelberg
Erschienen in
Mathematics and Financial Economics / Ausgabe 2/2020
Print ISSN: 1862-9679
Elektronische ISSN: 1862-9660
DOI
https://doi.org/10.1007/s11579-020-00257-y

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