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A Quick Algorithm for Pricing European Average Options

Published online by Cambridge University Press:  06 April 2009

Stuart M. Turnbull  and
Lee Macdonald Wakeman
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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
Information
Journal of Financial and Quantitative Analysis , Volume 26 , Issue 3 , September 1991 , pp. 377 - 389
Copyright
Copyright © School of Business Administration, University of Washington 1991

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