Pricing of geometric Asian options under Heston's stochastic volatility model

Bara Kim, In Suk Wee

    Research output: Contribution to journalArticlepeer-review

    33 Citations (Scopus)

    Abstract

    In this work, it is assumed that the underlying asset price follows Heston's stochastic volatility model and explicit solutions for the prices of geometric Asian options with fixed and floating strikes are derived. This approach has to deal with the derivation of the generalized joint Fourier transform of a square-root process and of three different weighted integrals of the square-root process with constant, linear and quadratic weights. Numerical implementation results for the complicated expressions are presented, together with the computational stability and efficiency of the method.

    Original languageEnglish
    Pages (from-to)1795-1809
    Number of pages15
    JournalQuantitative Finance
    Volume14
    Issue number10
    DOIs
    Publication statusPublished - 2014 Oct 1

    Bibliographical note

    Publisher Copyright:
    © 2014, Taylor & Francis Group, LLC.

    Keywords

    • Asian options
    • Methodology of pricing derivatives
    • Options pricing
    • Quantitative finance techniques
    • Stochastic volatility

    ASJC Scopus subject areas

    • Finance
    • Economics, Econometrics and Finance(all)

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