TY - JOUR
T1 - Sensitivities of asian options in the black-scholes model
AU - Pirjol, Dan
AU - Zhu, Lingjiong
N1 - Publisher Copyright:
© 2018 World Scientific Publishing Company.
PY - 2018/2/1
Y1 - 2018/2/1
N2 - We propose analytical approximations for the sensitivities (Greeks) of the Asian options in the Black-Scholes model, following from a small maturity/volatility approximation for the option prices which has the exact short maturity limit, obtained using large deviations theory. Numerical tests demonstrate good agreement of the proposed approximation with alternative numerical simulation results for cases of practical interest. We also study the qualitative properties of Asian Greeks, including new results for Rho, the sensitivity with respect to changes in the risk-free rate, and Psi, the sensitivity with respect to the dividend yield. In particular, we show that the Rho of a fixed-strike Asian option and the Psi of a floating-strike Asian option can change sign.
AB - We propose analytical approximations for the sensitivities (Greeks) of the Asian options in the Black-Scholes model, following from a small maturity/volatility approximation for the option prices which has the exact short maturity limit, obtained using large deviations theory. Numerical tests demonstrate good agreement of the proposed approximation with alternative numerical simulation results for cases of practical interest. We also study the qualitative properties of Asian Greeks, including new results for Rho, the sensitivity with respect to changes in the risk-free rate, and Psi, the sensitivity with respect to the dividend yield. In particular, we show that the Rho of a fixed-strike Asian option and the Psi of a floating-strike Asian option can change sign.
KW - Asian options
KW - Greeks
KW - approximation
KW - sensitivity analysis
UR - http://www.scopus.com/inward/record.url?scp=85042927486&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85042927486&partnerID=8YFLogxK
U2 - 10.1142/S0219024918500085
DO - 10.1142/S0219024918500085
M3 - Article
AN - SCOPUS:85042927486
SN - 0219-0249
VL - 21
JO - International Journal of Theoretical and Applied Finance
JF - International Journal of Theoretical and Applied Finance
IS - 1
M1 - 1850006
ER -