Journal of Banking & Finance Vol. 21 No. 5 1997
A P.D.E. approach to Asian options: analytical and numerical evidence
Abstract
We first derive a one-state-variable partial differential equation, easy to implement, which characterizes the price of a European type Asian option. This result is explained and related to previous literature. We then derive new results on the hedging of an Asian option and propose analytical and numerical analysis on the comparison between Asian and European options. Our methodology which applies to “fixed-strike” Asian options as well as to “floating-strike” Asian options completes and clarifies various results in the literature. In this paper we focus on “backward-starting” Asian options. Our approach is quite general however, and we explain how to adapt our main results to the case of “forward-starting” Asian options.
- DOI
- 10.1016/s0378-4266(96)00057-x
- Volume
- 21
- Issue
- 5
- Pages
- 613-640
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib