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AN IMPROVED BINOMIAL METHOD FOR PRICING ASIAN OPTIONS
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 Title & Authors
AN IMPROVED BINOMIAL METHOD FOR PRICING ASIAN OPTIONS
Moon, Kyoung-Sook; Kim, Hongjoong;
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 Abstract
We present an improved binomial method for pricing European- and American-type Asian options based on the arithmetic average of the prices of the underlying asset. At each node of the tree we propose a simple algorithm to choose the representative averages among all the effective averages. Then the backward valuation process and the interpolation are performed to compute the price of the option. The simulation results for European and American Asian options show that the proposed method gives much more accurate price than other recent lattice methods with less computational effort.
 Keywords
option pricing;binomial method;Asian option;American options;
 Language
English
 Cited by
 References
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