Due to the fact that the over-the-counter (OTC) market has no organized exchange, the options traded in the OTC market are more likely to be exposed to the credit risk. Asian option is one of them. In this paper we first discuss the pricing of arithmetic Asian options and the Black-Scholes...

The 2008 financial crisis forced investors to be more concerned with the risk management of financial instruments, especially derivatives. The main objective of this paper is to study the effect of issuer credit risk on the pricing of options. In particular, we focus on Asian options, which are...

In this paper we provide an accurate and efficient method for valuing Asian options that works well for the low and medium volatility as well as longer average time window. Numerical results show that our method significantly outperforms the other analytic approximation methods in the...