Valuation of Asian American Option Using a Modified Path Simulation Method

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DOI: 10.4236/wjet.2015.33C044    3,023 Downloads   3,378 Views  

ABSTRACT

In this paper, we use a modified path simulation method for valuation of Asian American Options. This method is a modification of the path simulation model proposed by Tiley. We assume that the behavior of the log return of the underlying assets follows the Variance Gamma (VG) process, since its distribution is heavy tail and leptokurtic. We provide sensitivity analysis of this method and compare the obtained prices to Asian European option prices.

Cite this paper

Permana, F. , Lesmono, D. and Chendra, E. (2015) Valuation of Asian American Option Using a Modified Path Simulation Method. World Journal of Engineering and Technology, 3, 296-301. doi: 10.4236/wjet.2015.33C044.

Conflicts of Interest

The authors declare no conflicts of interest.

References

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