A simple approach to valuing Asian rainbow options

Zhan, Huirong; Cheng, Qiansheng

doi:10.1504/ijecrm.2010.031382

Cited by 2 publications

(1 citation statement)

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“…Based on the arbitrage-free principle and the Ito lemma, Bin and Fei ( 2009 ) provided the pricing formula of geometric Asian rainbow option with known dividends. Within a Black–Scholes environment, Zhan and Cheng ( 2010 ) came up with a simple method to price Asian rainbow option on dividend-paying assets. By using fractional Brownian motion to portray the underlying assets prices, Wang et al.…”

Section: Introductionmentioning

confidence: 99%

Asian rainbow option pricing formulas of uncertain stock model

Gao

Liu

2021

Soft Comput

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Asian rainbow option is option on the minimum or the maximum of several average prices. In modern financial market, Asian rainbow option is an effective instrument for asset allocation and risk management. The investor with Asian rainbow option enjoys an entitlement to select a max or min from multiple assets with an exercise price at maturity date. The investor has to defray fee to acquire this right, which raises the option pricing issue. This paper mainly explores the pricing of Asian rainbow option in the uncertain financial environment, in which the underlying assets prices are treated as uncertain processes. Here, the pricing formulas of Asian rainbow option are derived under the condition that stock prices obey uncertain differential equations driven by independent Liu processes. Furthermore, some numerical examples are designed to compute the prices of these options.

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Section: Introductionmentioning

confidence: 99%