Asian option formula
An Asian option (or average value option) is a special type of option contract. For Asian options . used in conjunction with control variates in Monte Carlo simulations, the formula is useful for deriving fair values for the arithmetic Asian option. In general the Asian approximation formula works very well for valuing Asian The Black-Scholes formula will in general overestimate the Asian option value. Ch Arithmetic Average Options and Asian Opitons. I. Asian Options and Their Analytic Pricing Formulas. II. Binomial Tree Model to Price Average Options. III. An Asian option is an option type where the payoff depends on the average price of the underlying asset over a certain period of time as opposed to standard options (American and European) where. of a Geometric Asian option due to the properties of a geometric mean, . Arithmetic means does not share these vital properties with geometric means and Arithmetic Asian option prices are thus, plausibly, impossible to express in a closed form formula. As will be described, it is possible to. Jul 20, · Asian option (also known as average price option) is an option whose payoff is determined with respect to the (arithmetic or geometric) average price of the underlying asset over the term of the option.. While the payoff of a standard (American and European) option depends on the price of the underlying asset at a specific point of time i.e. the exercise date, the payoff of an Asian option Author: Obaidullah Jan, ACA, CFA.