An Investigation Into The Pricing Method Of Asian Options

The option is a certain right that the holder can buy or sell quantity and quality of underlying assets at fixed time in the future after paying the cost of option. In the last 20 years, options, as a effective method to avoid risk or speculation have rapid development. In the option contract, option price is a unique variable which changes with the supply and demand in the market. The option price affects the profit and loss of the holder and the writer directly. So the option pricing is the core issue in the trade of option. In 1973, F.Black and M.Scholes, the scholars in Chicago University raised Black-Scholes Option Pricing Model. This model in financial market establishes the theory for varies of option pricing according to the fluctuation of market price. The new derivative financial market includes stock, bond, money, goods. Black-Scholes model makes great progress of the research on pricing options.In recent years, along with the improvment of demand on the complexity in money market, it is difficult to satisfy the special needs of customers by only using the standard option. In order to satisfying the demand of markets and customers, to avoiding the risk of the investers, many financial companies not only designed European options and American options but also devised a great deal of new breeds which derive from stardard options and exchange out of the counter commonly. We call it exotic options. Most of exotic options possess the feature of path-dependent, that is, the option price not only depends on the option price at maturity, but also depends on varying of the underlying assets price. Asian options are just one of the typical products, and it is a kind of exotic options which is the most active one in financial derivative market. Because of the property of path-dependent, there exists distinguished difference between asian option pricing model and standard options'.The main goals of this paper is to study asian options. It is a typical representative of strongly path-dependent options. Asian option is different from standard option obviously. It is inauguration of European options. So it connects with the standard European options nearly. Black-Scholes Option Pricing Model is just one of the most effective means to solve main content of the article. Therefore we should understand Black-Scholes Option Pricing Model fully which concludes to our research. Its main content is as follows:Chapter One is introduction of the article. It recoinmands the conception of option briefly and several current method of pricing option at present. Further, it summarizes some historical documents which is related to Strongly path-dependent options-Asian options and lookback options. In the end, main content in this article is given.Chapter Two states B-S model detailedly and obtains the effective method on derivative financial instrument pricing: Delta-offset principle, arbitrage-free principle and whether it is in risk-neutral world or not. Next it narrates two chief outcomes in the extension and development of Black-Scholes option pricing model simply: pricing formulae for European option with transaction costs and the pricing formulae of European options with no risk-neutral valuation. In the end, it gives uniform B-S model of strongly path-dependentoption.Chapter Three gives Asian option pricing model, pricing formula and varies of pricing methods under different situations(continuous and discrete time), different types of payoff at the maturity (fixed strike price and floating strike price)as well as detaily gives call and put pricing formula inspectively. This Chapter renders the important result,that is, The pricing formula of the geometric average asian options under no risk-neutral world. Finally,it introduce lookback options concisely and several principles being related to lookback option pricing.Chapter Four elaborates asian option is playing an very important role in financial market, and summarizes this article.