2 pm, Tuesday March 16th, 2004
M345 (Building 28)
Pricing Asian options in the Black-Scholes framework
Professor Daniel Dufresne
Department of Ecomomics
University of Melbourne
Pricing an Asian (or average) option involves the
distribution of the sum of a possibly large number of
lognormal variables, which creates numerical
difficulties. Geman and Yor (Mathematical Finance,
1993) derived an exact formula for the Laplace
transform of the price of an Asian option, valid if
the sum of lognormals is replaced by an integral. I
will briefly describe how they obtained their formula,
and then look at some subsequent developments.
Convenor:Aidan Sudbury