Pricing and hedging of Asian options: quasi-explicit solutions via Malliavin calculus

We use Malliavin calculus and the Clark–Ocone formula to derive the hedging strategy of an arithmetic Asian Call option in general terms. Furthermore we derive an expression for the density of the integral over time of a geometric Brownian motion, which allows us to express hedging strategy and price of the Asian option as an analytic expression. Numerical computations which are based on this expression are provided. Copyright Springer-Verlag 2011

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Year of publication:	2011
Authors:	Yang, Zhaojun ; Ewald, Christian-Oliver ; Menkens, Olaf
Published in:	Mathematical Methods of Operations Research. - Springer. - Vol. 74.2011, 1, p. 93-120
Publisher:	Springer
Subject:	Asian options \| Option pricing \| Hedging \| Malliavin calculus

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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