Pricing Asian Options on Assets Driven by a Combined Geometric Brownian Motion and a Geometric Compound Poisson Process

10.6186/IJIMS.2010.21.2.1

Hsien-Jen Lin

Asian Options ； Poisson Measure ； Markovian Processes ； The Ito Formula ； Integro-Differential Equations

International Journal of Information and Management Sciences

21：2（2010 / 06 / 01）

113 - 124

英文

In the paper we study the pricing of Asian options when the price dynamics of the underlying asset are driven by a combined geometric Brownian motion and a geometric compound Poisson process. With the presence of the jump effect, the market in this model is (in general) incomplete, and that therefore there are no unique hedging prices. For this model, we adopt the minimal martingale measure introduced by Follmer and Schweizer [7] as the risk-neutral pricing measure. We then present a partial integro-differential equation (PIDE) whose solution leads to Asian option prices.

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