TITLE:
Valuation of Asian American Option Using a Modified Path Simulation Method
AUTHORS:
Ferry Jaya Permana, Dharma Lesmono, Erwinna Chendra
KEYWORDS:
Asian American Option, European American Option, Variance Gamma Process, Path Simulation Model
JOURNAL NAME:
World Journal of Engineering and Technology,
Vol.3 No.3C,
October
23,
2015
ABSTRACT:
In this paper, we use a modified path
simulation method for valuation of Asian American Options. This method is a
modification of the path simulation model proposed by Tiley. We assume that the
behavior of the log return of the underlying assets follows the Variance Gamma
(VG) process, since its distribution is heavy tail and leptokurtic. We provide
sensitivity analysis of this method and compare the obtained prices to Asian
European option prices.