TITLE:
The Asian Option Pricing when Discrete Dividends Follow a Markov-Modulated Model
AUTHORS:
Yingyi Fang, Huisheng Shu, Xiu Kan, Xin Zhang, Zhiwei Zheng
KEYWORDS:
Arithmetic Average Asian Call Option, Discrete Dividends, Geometric Brownian Motion, Markov-Modulated Volatility, Binomial Tree
JOURNAL NAME:
Open Journal of Statistics,
Vol.7 No.6,
December
29,
2017
ABSTRACT: This paper is concerned with the pricing problem of the discrete
arithmetic average Asian call option while the discrete dividends follow geometric
Brownian motion. The volatility of the dividends model depends on the Markov-Modulated
process. The binomial tree method, in which a more accurate factor has been
used, is applied to solve the corresponding pricing problem. Finally, a
numerical example with simulations is presented to demonstrate the
effectiveness of the proposed method.