We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.

Approximations for Asian options in local volatility models

FOSCHI, PAOLO;PASCUCCI, ANDREA;S. Pagliarani
2013

Abstract

We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat kernel expansion method in the framework of hypoelliptic, not uniformly parabolic, partial differential equations.
2013
P. Foschi; A. Pascucci; S. Pagliarani
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/116820
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