Next Article in Journal
Constructal Optimizations for Heat and Mass Transfers Based on the Entransy Dissipation Extremum Principle, Performed at the Naval University of Engineering: A Review
Next Article in Special Issue
Generalized Pesin-Like Identity and Scaling Relations at the Chaos Threshold of the Rössler System
Previous Article in Journal
Energetic and Exergetic Analysis of a Transcritical N2O Refrigeration Cycle with an Expander
Article Menu
Issue 1 (January) cover image

Export Article

Open AccessArticle
Entropy 2018, 20(1), 71; https://doi.org/10.3390/e20010071

Non-Gaussian Closed Form Solutions for Geometric Average Asian Options in the Framework of Non-Extensive Statistical Mechanics

1,2,* , 1,2
and
3
1
College of Finance and Mathematics, West Anhui University, Lu’an 237012, China
2
Financial Risk Intelligent Control and Prevention Institute of West Anhui University, Lu’an 237012, China
3
School of Mathematics and Information Sciences, Henan Normal University, Xinxiang 453002, China
*
Author to whom correspondence should be addressed.
Received: 17 November 2017 / Revised: 30 December 2017 / Accepted: 16 January 2018 / Published: 18 January 2018
(This article belongs to the Special Issue Nonadditive Entropies and Complex Systems)
Full-Text   |   PDF [266 KB, uploaded 18 January 2018]   |  

Abstract

In this paper we consider pricing problems of the geometric average Asian options under a non-Gaussian model, in which the underlying stock price is driven by a process based on non-extensive statistical mechanics. The model can describe the peak and fat tail characteristics of returns. Thus, the description of underlying asset price and the pricing of options are more accurate. Moreover, using the martingale method, we obtain closed form solutions for geometric average Asian options. Furthermore, the numerical analysis shows that the model can avoid underestimating risks relative to the Black-Scholes model. View Full-Text
Keywords: geometric average Asian option; Non-extensive statistics; martingale method geometric average Asian option; Non-extensive statistics; martingale method
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
SciFeed

Share & Cite This Article

MDPI and ACS Style

Zhao, P.; Zhou, B.; Wang, J. Non-Gaussian Closed Form Solutions for Geometric Average Asian Options in the Framework of Non-Extensive Statistical Mechanics. Entropy 2018, 20, 71.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Entropy EISSN 1099-4300 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top