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Pricing Asian Options using Moment Matching on a Multinomial Lattice
Mälardalens högskola, Akademin för utbildning, kultur och kommunikation, Utbildningsvetenskap och Matematik. (Mathematics and Applied Mathematics)
Mälardalens högskola, Akademin för utbildning, kultur och kommunikation, Utbildningsvetenskap och Matematik. (Mathematics and Applied Mathematics)ORCID-id: 0000-0003-3204-617X
Mälardalens högskola, Akademin för utbildning, kultur och kommunikation, Utbildningsvetenskap och Matematik. (Mathematics and Applied Mathematics)ORCID-id: 0000-0003-4554-6528
University of Nairobi, Kenya. (School of Mathematics)
2014 (engelsk)Inngår i: 10TH INTERNATIONAL CONFERENCE ON MATHEMATICAL PROBLEMS IN ENGINEERING, AEROSPACE AND SCIENCES: ICNPAA 2014 Conference date: 15–18 July 2014 Location: Narvik, Norway ISBN: 978-0-7354-1276-7 Editor: Seenith Sivasundaram Volume number: 1637 Published: 10 december 2014 / [ed] Seenith Sivasundaram, 2014, s. 759-765Konferansepaper, Publicerat paper (Fagfellevurdert)
Abstract [en]

Pricing Asian options is often done using bi- or trinomial lattice methods. Here some results for generalizing these methods to lattices with more nodes are presented. We consider Asian option pricing on a lattice where the underlying asset follows Merton–Bates jump-diffusion model and describe the construction of a lattice using the moment matching technique which results in an equation system described by a rectangular Vandermonde matrix. The system is solved using the explicit expression for the inverse of the Vandermonde matrix and some restrictions on the jump sizes of the lattice and the distribution of moments are identified. The consequences of these restrictions for the suitability of the multinomial lattice methods are also discussed.

sted, utgiver, år, opplag, sider
2014. s. 759-765
Emneord [en]
Jump-diffusion process, lattices, Vandermonde matrix, Asian options, option pricing
HSV kategori
Forskningsprogram
matematik/tillämpad matematik
Identifikatorer
URN: urn:nbn:se:mdh:diva-27256DOI: 10.1063/1.4904648ISI: 000347812200091Scopus ID: 2-s2.0-85011615243ISBN: 978-0-7354-1276-7 (tryckt)OAI: oai:DiVA.org:mdh-27256DiVA, id: diva2:775313
Konferanse
10TH INTERNATIONAL CONFERENCE ON MATHEMATICAL PROBLEMS IN ENGINEERING, AEROSPACE AND SCIENCES: ICNPAA 2014 Conference date: 15–18 July 2014 Location: Narvik, Norway
Tilgjengelig fra: 2014-12-31 Laget: 2014-12-31 Sist oppdatert: 2025-10-10bibliografisk kontrollert

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