TY - JOUR
T1 - A new control variate estimator for an Asian option
AU - Kamizono, Kenji
AU - Kariya, Takeaki
AU - Liu, Regina Y.
AU - Nakatsuma, Teruo
N1 - Copyright:
Copyright 2006 Elsevier B.V., All rights reserved.
PY - 2004
Y1 - 2004
N2 - There exist several estimators for valuing the Asian option on the arithmetic mean. Among all variance reduction estimators, the one with the control variate derived from the geometric mean has been shown by Boyle et al. (1997) to perform best so far. In this paper, a new improved control variate estimator for this type of Asian option is proposed and investigated. Simulation results confirm that it does perform better than the control variate derived from the geometric mean. The improvement becomes more significant as the volatility increases and/or as the time to expiration lengthens.
AB - There exist several estimators for valuing the Asian option on the arithmetic mean. Among all variance reduction estimators, the one with the control variate derived from the geometric mean has been shown by Boyle et al. (1997) to perform best so far. In this paper, a new improved control variate estimator for this type of Asian option is proposed and investigated. Simulation results confirm that it does perform better than the control variate derived from the geometric mean. The improvement becomes more significant as the volatility increases and/or as the time to expiration lengthens.
KW - Control variate estimator
KW - Monte-Carlo simulation
KW - Option pricing
KW - Variance reduction technique
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U2 - 10.1007/s10690-006-9007-8
DO - 10.1007/s10690-006-9007-8
M3 - Article
AN - SCOPUS:33749483720
SN - 1387-2834
VL - 11
SP - 143
EP - 160
JO - Asia-Pacific Financial Markets
JF - Asia-Pacific Financial Markets
IS - 2
ER -