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The Asian Option Pricing when Discrete Dividends Follow a Markov-Modulated Model

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DOI: 10.4236/ojs.2017.76074    410 Downloads   754 Views

ABSTRACT

This paper is concerned with the pricing problem of the discrete arithmetic average Asian call option while the discrete dividends follow geometric Brownian motion. The volatility of the dividends model depends on the Markov-Modulated process. The binomial tree method, in which a more accurate factor has been used, is applied to solve the corresponding pricing problem. Finally, a numerical example with simulations is presented to demonstrate the effectiveness of the proposed method.

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Fang, Y. , Shu, H. , Kan, X. , Zhang, X. and Zheng, Z. (2017) The Asian Option Pricing when Discrete Dividends Follow a Markov-Modulated Model. Open Journal of Statistics, 7, 1067-1080. doi: 10.4236/ojs.2017.76074.

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