Pricing and Hedging Asian Basket Spread Options
In this paper we consider the problem of pricing a general Asian basket spread option. We develop approximations formulae based on comonotonicity theory and moment matching methods. We compare their relative performances and explain how to choose the best approximation technique as a function of the Asian basket spread characteristics. We also give the Greeks for our proposed methods. In the last section we extend our results to options denominated in foreign currency.
Year of publication: |
2008
|
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Authors: | Deelstra, Griselda ; Petkovic, Alexandre ; Vanmaele, Michèle |
Institutions: | European Centre for Advanced Research in Economics and Statistics (ECARES), Solvay Brussels School of Economics and Management |
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