Valuation of the Asian American Option Using a Modified Path Simulation Method

Articles

Valuation of the Asian American Option Using a Modified Path Simulation Method [CET 2015]
Author(s)
Dharma Lesmono
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 provides sensitivity analysis of this method and compares the obtained prices to Asian European option prices.
KEYWORDS
Asian American Option, Modified Path Simulation Method
References