Asian option approximation



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Click the button below to return to the English verison of the page. Then the approximating density for ln is given by: In the present paper we examine in greater detail the methods based on the moments, i. There is some initial reason to think that matching moments will give a good approximation. On the other hand, in the case of the arithmetic average we have a convolution of an infinite number of lognormal distributions and this convolution can change the distribution from a heavy tail density the lognormal to a light-tail density the arithmetic average and so there could a little possibility that the moments determine uniquely the distribution. Note the negative values assumed by the Edgeworth approximation.
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Asian Options: Analytical Approach


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Asian Options - Curran's Approximation Template

Back Bear Box Bull Butterfly Calendar Diagonal Intermarket Ratio Vertical. Crossref Hull , J. Interaction Help About Wikipedia Community portal Recent changes Contact page. On the other hand, in the case of the arithmetic average we have a convolution of an infinite number of lognormal distributions and this convolution can change the distribution from a heavy tail density the lognormal to a light-tail density the arithmetic average and so there could a little possibility that the moments determine uniquely the distribution.
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