dc.contributor.advisor Witbooi, Peter J. dc.contributor.author Dyakopu, Neliswa B. dc.date.accessioned 2014-06-13T12:54:22Z dc.date.available 2014-06-13T12:54:22Z dc.date.issued 2014 dc.identifier.uri http://hdl.handle.net/11394/3341 dc.description >Magister Scientiae - MSc en_US dc.description.abstract This dissertation studies the computation methods of pricing of Asian options. Asian options are options in which the underlying variable is the average price over a period of time. Because of this, Asian options have a lower volatility and this render them cheaper relative to their European counterparts. Asian options belong to the so-called path-dependent derivatives; they are among the most difficult to price and hedge both analytically and numerically. In practice, it is only discrete Asian options that are traded, however continuous Asian options are used for studying purposes. Several approaches have been proposed in the literature, including Monte Carlo simulations, tree-based methods, Taylor’s expansion, partial differential equations, and analytical ap- en_US proximations among others. When using partial differential equations for pricing of continuous time Asian options, the high dimensionality is problematic. In this dissertation we focus on the discrete time methods. We start off by explaining the binomial tree method, and our last chapter presents the very exciting and relatively simple method of Tsao and Huang, using Taylor approximations. The main papers that are used in this dissertation are articles by Jan Vecer (2001); LCG Rogers (1995); Eric Benhamou (2001); Gianluca Fusai (2007); Kamizono, Kariya and Nakatsuma (2006) and Tsao and Huang (2007). The author has provided computations, including graphs and tables dispersed over the different chapters, to demonstrate the utility of the methods. We observe various parameters of influence such as correlation, volatility, strike, etc. A further contribution by the author of this dissertation is, in particular, in Chapter 5, in the presentation of the work of Tsao et al. Here we have provided slightly more detailed explanations and again some further computational tables. dc.language.iso en en_US dc.publisher University of Western Cape en_US dc.subject Asian option en_US dc.subject Basket option en_US dc.subject Binary tree en_US dc.subject Black-Scholes en_US dc.subject Control variate en_US dc.subject Cox-Ross-Rubinstein en_US dc.subject Levy process en_US dc.subject Monte Carlo en_US dc.subject Lower bound en_US dc.subject Stochastic volatility en_US dc.title Discrete time methods of pricing Asian options en_US dc.type Thesis en_US dc.rights.holder University of Western Cape en_US
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