Anmerkungen:
In: Journal of Economics, Finance & Administrative Science, Vol. 15, No. 29, 2010
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 15, 2010 erstellt
Beschreibung:
This paper discusses the pricing of arithmetic Asian options when the underlying stock follows the constant elasticity of variance (CEV) process. We build a binomial tree method to estimate the CEV process and use it to price arithmetic Asian options. We fi nd that the binomial tree method for the lognormal case can effectively solve the computational problems arising from the inherent complexities of arithmetic Asian options when the stock price follows CEV process. We present numerical results to demonstrate the validity and the convergence of the approach for the different parameter values set in CEV process