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Closed‐form lower bounds for the price of arithmetic average Asian options by multiple conditioning

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  • Geon Ho Choe
  • Minseok Kim
Abstract
We present closed‐form lower bounds for the price of arithmetic average Asian options under geometric Brownian motion. Lower bounds are found by conditioning on multiple normal variables, each of which is a weighted sum of Brownian motions. Numerical results show that our lower bounds are close to Monte Carlo prices and improve single conditioning methods especially for high volatility and long maturity.

Suggested Citation

  • Geon Ho Choe & Minseok Kim, 2021. "Closed‐form lower bounds for the price of arithmetic average Asian options by multiple conditioning," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 1916-1932, December.
    • Handle: RePEc:wly:jfutmk:v:41:y:2021:i:12:p:1916-1932
    DOI: 10.1002/fut.22265
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