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A Fast, Accurate, and Simple Method for Pricing European-Asian and Saving-Asian Options

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Abstract

We propose an efficient and accurate randomized approximation algorithm for computing the price of European-Asian options. Our algorithm can be seen as a modification of the approximation algorithm developed by Aingworth et al. (2000) into a randomized algorithm, which improves the accuracy theoretically as well as practically. We also propose a new option named the Saving-Asian option which enjoys advantages of both the European-Asian and American-Asian options. It is shown that our approximation algorithm also works for pricing Saving-Asian options.

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Authors and Affiliations

  1. DC Card Co., Ltd., Tokyo, Japan

    Ken’ichiro Ohta

  2. Graduate School of Information Science and Electrical Engineering, Kyushu University, Fukuoka 812-8581, Japan

    Kunihiko Sadakane

  3. Graduate School of Information Sciences, Tohoku University, Sendai 980-8579, Japan

    Akiyoshi Shioura & Takeshi Tokuyama

Authors
  1. Ken’ichiro Ohta
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  2. Kunihiko Sadakane
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  3. Akiyoshi Shioura
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  4. Takeshi Tokuyama
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Corresponding authors

Correspondence to Kunihiko Sadakane, Akiyoshi Shioura or Takeshi Tokuyama.

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Ohta, K., Sadakane, K., Shioura, A. et al. A Fast, Accurate, and Simple Method for Pricing European-Asian and Saving-Asian Options. Algorithmica 42, 141–158 (2005). https://doi.org/10.1007/s00453-004-1143-9

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  • DOI: https://doi.org/10.1007/s00453-004-1143-9

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