Pricing Of Discrete Asian Options

In recent years, with the rapid development of financial markets, financial products are increasingly rich,continue to meet the needs of investors hedging, risk management.In addition to the familiar European and American standard options, a lot of new types derived from the standard options have been designed. We call them the class of exotic options. Asian options are one of them.Asian option has a highly path dependent.For the geometric average Asian option, the geometric mean of the stock price remains lognormal distribution, so the pricing of European geometric average Asian option is relatively simple,and it has been a pricing formula.However, for the arithmetic average Asian option,its price is no longer lognormal distribution, so the classic pricing formula is no longer applied to it.Therefore, this paper proposes a method of pricing the arithmetic average Asian option.It use the linear interpolation method with the multinomial lattices.This paper describes the binomial lattice, and price the arithmetic average Asian option of discrete monitoring points, and further research the multinomial lattice model based on the binomial model.In the multinomial lattice model,for the stock price on the monitor point, we use a recursive manner to discount the value of the option in order to obtain the arithmetic average Asian option price.In order to reduce the degree of computational complexity, we divide two parts.For this part Ti>(n+1)X.we use a formula to obtain the arithmetic average Asian option price.For that part Ti<{n+1)X,According to certain rules to choose the number of states for each node of the lattice, and use recursive method to obtain the value of a discrete Asian option.The error between this results and the full path calculated is(?).This paper discuss a new Asian option that is Saving Asian options and pricing.