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AN EFFICIENT BINOMIAL METHOD FOR PRICING ASIAN OPTIONS
- Authors
- Moon, Kyoung-Sook; Jeong, Yunju; Kim, Hongjoong
- Issue Date
- 2016
- Publisher
- ACAD ECONOMIC STUDIES
- Keywords
- binomial tree method; cell averaging; Asian options
- Citation
- ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, v.50, no.2, pp.151 - 164
- Indexed
- SCIE
SSCI
SCOPUS
- Volume
- 50
- Number
- 2
- Start Page
- 151
- End Page
- 164
- ISSN
- 0424-267X
- Abstract
- We construct an efficient tree method for pricing path dependent Asian options. The standard tree method estimates option prices at each node of the tree, while the proposed method defines an interval about each node along the stock price axis and estimates the average option price over each interval. The proposed method can be used independently to construct a new tree method, or it can be combined with other existing free methods to improve the accuracy. Numerical results show that the proposed schemes show superiority in accuracy to other tree methods when applied to discrete forward-starting Asian options and continuous European or American Asian options.
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