Browsing by Author "Palmer, Kenneth J."

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Moment-Matching Approximations for Asian Options
(2014-06-01)
Lo, Chien-Ling
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Palmer, Kenneth J.
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Yu, Min-Teh
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資訊管理與財務金融系註：原資管所+財金所
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Department of Information Management and Finance
This study provides a generalized framework under which all types of Asian options can be priced: fixed and floating strike, forward starting, and in progress. We not only extend the previous studies to our framework, but also propose a new and theoretically supported closed-form approximation for the option prices. We utilize the moment-matching approach, providing a tractable, flexible, and efficient iterative method to calculate the moments. This study also suggests that the use of a Taylor expansion is unnecessary and exhibits the considerable improvement achieved by avoiding truncation errors.