Pricing asian options black scholes

Consider the derivative which pays. What is the time-0 price for this derivative, and show it is less than the price of a European call. The pay-off is different - so what can we compare. So we can say that given the same moneyness the Asian option looks like a standard European option but with a third of its implied vol. Thus the Asian is cheaper.

Another reference Theory of Continuously-sampled Asian Option pricing. By posting your answer, you agree to the privacy policy and terms of service.

By subscribing, you agree to the privacy policy and terms of service. Sign up or log in to customize your list. Stack Exchange Inbox Reputation and Badges.

Questions Tags Users Badges Unanswered. Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics.

Join them; it only takes a minute: Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top. How to prove price of Asian option under geometric averaging is cheaper than a European call?

This was an exam question at Cambridge University. I don't see how this is less than the European call. RegDwight 1 1 4.

black scholes - How to prove price of Asian option under geometric averaging is cheaper than a European call? - Quantitative Finance Stack Exchange

Lost1 2 Hi, the pay-off that you describe here is that of an Asian option with geometric averaging. Maybe I find time to formulate an answer later. Richard nudge if you cba, a reference would also do. Thus the price of it should be lower than that of the European option.

Asian option - Wikipedia

Richard 7, 2 20 The 2nd ref does not open on my iPad. Will try again on a computer later. Google the title and you will get a download link.

I can not post the direct link. Sign up or log in StackExchange. Sign up using Facebook. Sign up using Email and Password. Post as a guest Name.

In it, you'll get: The week's top questions and answers Important community announcements Questions that need answers. Quantitative Finance Stack Exchange works best with JavaScript enabled.

MathOverflow Mathematics Cross Validated stats Theoretical Computer Science Physics Chemistry Biology Computer Science Philosophy more 3.

Meta Stack Exchange Stack Apps Area 51 Stack Overflow Talent.