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Asian option pricing problems of uncertain mean-reverting stock model

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Abstract

An Asian option is a special type of option contract which reduces the volatility inherent in the option because of the averaging feature, so it is one of the most actively exotic options traded in today’s financial derivative market. As an application of the uncertain process in the field of finance, the uncertain finance assumes that the asset price follows an uncertain differential equation. In this paper, Asian options are proposed in the uncertain financial market based on a mean-reverting stock model and their pricing formulas are derived. In addition, some numerical algorithms are designed to compute the prices of the Asian options on the basis of the pricing formulas.

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Acknowledgements

This study was funded by the National Natural Science Foundation of China (Grant Nos. 61403360, 71532013 and 71573244) and the Open Project of Key Laboratory of Big Data Mining and Knowledge Management, Chinese Academy of Sciences.

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Authors and Affiliations

  1. School of Economics and Management, University of Chinese Academy of Sciences, Beijing, 100190, China

    Yiyao Sun, Kai Yao & Jichang Dong

  2. Key Laboratory of Big Data Mining and Knowledge Management, Chinese Academy of Sciences, Beijing, 100190, China

    Kai Yao & Jichang Dong

Authors
  1. Yiyao Sun
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  2. Kai Yao
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  3. Jichang Dong
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Corresponding author

Correspondence to Jichang Dong.

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The authors declare that they have no conflict of interest.

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This article does not contain any studies with human participants performed by any of the authors.

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This work was carried out in collaboration between all authors. All authors read and approved the final manuscript.

Additional information

Communicated by Y. Ni.

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Cite this article

Sun, Y., Yao, K. & Dong, J. Asian option pricing problems of uncertain mean-reverting stock model. Soft Comput 22, 5583–5592 (2018). https://doi.org/10.1007/s00500-017-2524-8

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