The Actuarial Option Pricing Approach To Asian Options

As a kind of strong path dependence options, Asian options are one of the normal exotic options, and their execution are dependent on the stock average price. For the decreasing of the influence of stocks value, the price of Asian options is lower than the standard option, therefore it is more popular in the currency and the commodity markets.Because traditional pricing methods are based on the assumption of no arbitrage, well balanced and complete market, there are many restrictions in the pricing process. For this sake, in 1998 Mogens Bladt and Tina Hviid Rydberg put forward the actuarial option pricing approach, which turns the pricing of standard options into an equivalent fair premium determination, and makes out a new way to option pricing. The main advantage of this approach is that the precise does not involve in any economic assumption, and can be use in the arbitrage, not well balanced and incomplete market.For the widely application of Asian options, the article transplants the actuarial option pricing approach to the pricing of Asian options. Because of the arithmetic average and geometric average of the stock price in the Asian options pricing model, there are much more difficult in the pricing process. Based of the former conclusions of others and some works of myself, the article deduced the pricing formula in the case of the arithmetic average and geometric average of the stock price.