Skip to main content Accessibility help
×
Home
Hostname: page-component-59b7f5684b-vh8gq Total loading time: 0.247 Render date: 2022-10-05T08:47:19.193Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "displayNetworkTab": true, "displayNetworkMapGraph": false, "useSa": true } hasContentIssue true

A Quick Algorithm for Pricing European Average Options

Published online by Cambridge University Press:  06 April 2009

Abstract

An algorithm is described that prices European average options. The algorithm is tested against Monte Carlo estimates and is shown to be accurate. The speed of the algorithm is comparable to the Black-Scholes algorithm. A closed-form solution is derived for European geometric average options.

Type
Research Article
Copyright
Copyright © School of Business Administration, University of Washington 1991

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Boyle, P. P.Rates of Return as Random Variables.” Journal of Risk and Insurance, 43 (12 1976), 694711.CrossRefGoogle Scholar
Boyle, P. P.Options: A Monte Carlo Approach.” Journal of Financial Economics, 4 (05 1977), 323338.CrossRefGoogle Scholar
Boyle, P. P., and Emanuel, D.. “Options and the General Mean.” Working Paper, Accounting Group, Univ. of Waterloo (07 1982).Google Scholar
Cox, J., and Ross, S.. “The Valuation of Options for Alternative Stochastic Processes.” Journal of Financial Economics, 3 (01/03 1976), 145166.CrossRefGoogle Scholar
Jarrow, R., and Rudd, A.. “Approximate Option Valuation for Arbitrary Stochastic Processes.” Journal of Financial Economics, 10 (11 1982), 346369.CrossRefGoogle Scholar
Kemna, A. G. Z., and Vorst, A. C. F.. “A Pricing Method for Options Based on Average Asset Values.” Journal of Banking and Finance, 14 (03 1990), 113129.CrossRefGoogle Scholar
Kendall, M., and Stuart, A.. The Advanced Theory of Statistics, Vol. 1, 4th ed.New York: Macmillan (1977).Google Scholar
Mitchell, R. L.Permanence of the Log-Normal Distribution.” Journal of the Optical Society of America, 58 (09 1968), 12671272.CrossRefGoogle Scholar
Rubinstein, R. Y.Simulation and the Monte Carlo Method. New York: John Wiley & Sons (1981).CrossRefGoogle Scholar
Smith, C.Option Pricing: A Review.” Journal of Financial Economics, 3 (01/03 1976), 352.CrossRefGoogle Scholar
282
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

A Quick Algorithm for Pricing European Average Options
Available formats
×

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

A Quick Algorithm for Pricing European Average Options
Available formats
×

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

A Quick Algorithm for Pricing European Average Options
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *