Pricing Asian Options with Stochastic Convenience Yield and Jumps

2020 ◽  
Author(s):  
Christian-Oliver Ewald ◽  
Yuexiang Wu ◽  
Aihua Zhang
Keyword(s):  
Asian Options ◽  
Convenience Yield ◽  
Stochastic Convenience Yield

On the Performance of the Comonotonicity Approach for Pricing Asian Options in Some Benchmark Models from Equities and Commodities

2017 ◽  
Vol 20 (01) ◽  
pp. 1750005
Author(s):  
Jilong Chen ◽  
Christian Ewald
Keyword(s):  
Upper Bounds ◽  
Stochastic Volatility Model ◽  
Asian Options ◽  
Convenience Yield ◽  
Yield Model ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Hedging Strategies ◽  
Volatility Model

In this paper, we investigate the applicability of the comonotonicity approach in the context of various benchmark models for equities and commodities. Instead of classical Lévy models as in Albrecher et al. we focus on the Heston stochastic volatility model, the constant elasticity of variance (CEV) model and Schwartz’ 1997 stochastic convenience yield model. We show how the technical difficulties of inverting the distribution function of the sum of the comonotonic random vector can be overcome and that the method delivers rather tight upper bounds for the prices of Asian Options in these models, at least for strikes which are not too large. As a by-product the method delivers super-hedging strategies which can be easily implemented.

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