Malaysian Journal of Mathematical Sciences, January 2020, Vol. 14, No. 1
Pricing Arithmetic Asian Put Option with Early Exercise Boundary under Jump-Diffusion Process
Laham, M. F., Ibrahim, S. N. I., and Kilicman, A.
Corresponding Email: iqmal@upm.edu.my
Received date: 31 August 2018
Accepted date: 29 May 2019
Abstract:
Arithmetic Asian options is a financial derivative whose payoff depends on the average of the underlying asset which can either be European-style or American-style. The aim of this study is to provide a pricing formulae for arithmetic Asian option with early exercise boundary under jump-diffusion process by implementing the probabilistic approach and conditional expected values. We provide numerical examples for approximation formulae of arithmetic Asian option using quadrature methods and compare the results with Monte Carlo simulation which demonstrate the efficiency of the numerical integration technique.
Keywords: American-Asian option, Option pricing, Monte Carlo Simulation, Jump-diffusion process
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