On Asian option pricing for NIG Lévy processes

In this paper, we derive approximations and bounds for the Esscher price of European-style arithmetic and geometric average options. The asset price process is assumed to be of exponential Lévy type with normal inverse Gaussian (NIG) distributed log-returns. Numerical illustrations of the accuracy o...

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Veröffentlicht in:	Journal of computational and applied mathematics 2004-11, Vol.172 (1), p.153-168
Hauptverfasser:	Albrecher, Hansjörg, Predota, Martin
Format:	Artikel
Sprache:	eng
Schlagworte:	Applications Comonotonicity Esscher transform Exact sciences and technology Inference from stochastic processes time series analysis Insurance, economics, finance Mathematics Normal inverse Gaussian distribution Probability and statistics Probability theory and stochastic processes Sciences and techniques of general use Statistics Stochastic processes
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Beschreibung
Zusammenfassung:	In this paper, we derive approximations and bounds for the Esscher price of European-style arithmetic and geometric average options. The asset price process is assumed to be of exponential Lévy type with normal inverse Gaussian (NIG) distributed log-returns. Numerical illustrations of the accuracy of these bounds as well as approximations and comparisons of the NIG average option prices with the corresponding Black–Scholes prices are given.
ISSN:	0377-0427 1879-1778
DOI:	10.1016/j.cam.2004.01.037