Pricing arithmetic Asian options under jump diffusion CIR processes

Jong Jun Park; Hyun Jin Jang; Jiwook Jang

doi:10.1016/j.frl.2019.08.017

Pricing arithmetic Asian options under jump diffusion CIR processes

Jong Jun Park, Hyun Jin Jang, Jiwook Jang

Department of Actuarial Studies and Business Analytics

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

Abstract

We compute analytical formulae for pricing arithmetic Asian options under jump diffusion CIR processes. To derive the solution, we employ a characteristic function of the underlying asset price process and its integrated process that is not required to take the inversion Fourier or Laplace transform. We conduct numerical tests for validation of proposed formulae to confirm that they provide stable and accurate option prices with much faster computation time than the full Monte Carlo method.

Original language	English
Article number	101269
Pages (from-to)	1-8
Number of pages	8
Journal	Finance Research Letters
Volume	34
Early online date	20 Aug 2019
DOIs	https://doi.org/10.1016/j.frl.2019.08.017
Publication status	Published - May 2020

Keywords

Arithmetic Asian options
Characteristic functions
Joint Fourier and Laplace transforms
Jump diffusion CIR processes

Access to Document

10.1016/j.frl.2019.08.017

Cite this

@article{f335b27ea267467398dab4be14324cc0,

title = "Pricing arithmetic Asian options under jump diffusion CIR processes",

abstract = "We compute analytical formulae for pricing arithmetic Asian options under jump diffusion CIR processes. To derive the solution, we employ a characteristic function of the underlying asset price process and its integrated process that is not required to take the inversion Fourier or Laplace transform. We conduct numerical tests for validation of proposed formulae to confirm that they provide stable and accurate option prices with much faster computation time than the full Monte Carlo method.",

keywords = "Arithmetic Asian options, Characteristic functions, Joint Fourier and Laplace transforms, Jump diffusion CIR processes",

author = "Park, \{Jong Jun\} and Jang, \{Hyun Jin\} and Jiwook Jang",

year = "2020",

month = may,

doi = "10.1016/j.frl.2019.08.017",

language = "English",

volume = "34",

pages = "1--8",

journal = "Finance Research Letters",

issn = "1544-6123",

publisher = "Elsevier",

}

TY - JOUR

T1 - Pricing arithmetic Asian options under jump diffusion CIR processes

AU - Park, Jong Jun

AU - Jang, Hyun Jin

AU - Jang, Jiwook

PY - 2020/5

Y1 - 2020/5

N2 - We compute analytical formulae for pricing arithmetic Asian options under jump diffusion CIR processes. To derive the solution, we employ a characteristic function of the underlying asset price process and its integrated process that is not required to take the inversion Fourier or Laplace transform. We conduct numerical tests for validation of proposed formulae to confirm that they provide stable and accurate option prices with much faster computation time than the full Monte Carlo method.

AB - We compute analytical formulae for pricing arithmetic Asian options under jump diffusion CIR processes. To derive the solution, we employ a characteristic function of the underlying asset price process and its integrated process that is not required to take the inversion Fourier or Laplace transform. We conduct numerical tests for validation of proposed formulae to confirm that they provide stable and accurate option prices with much faster computation time than the full Monte Carlo method.

KW - Arithmetic Asian options

KW - Characteristic functions

KW - Joint Fourier and Laplace transforms

KW - Jump diffusion CIR processes

UR - https://www.scopus.com/pages/publications/85071236909

U2 - 10.1016/j.frl.2019.08.017

DO - 10.1016/j.frl.2019.08.017

M3 - Article

AN - SCOPUS:85071236909

SN - 1544-6123

VL - 34

SP - 1

EP - 8

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 101269

ER -

Pricing arithmetic Asian options under jump diffusion CIR processes

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this