Asian option pricing with comonotonic bounds.

Details

Supervisors

Vrins, Frédéric

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie, à finalité approfondie

Abstract

The goal of this master thesis is to implement and test the quality of Asian option price intervals derived from comonotonic bounds. The quality of these bounds has been evaluated in a Black-Scholes framework, and the benchmark prices have been obtained by Monte-Carlo simulations with variance reduction. Also, the quality of these bounds has been challenged in the context of stochastic volatility, when the stochastic volatility is modeled as the exponential of a fast mean-reverting Ornstein-Uhlenbeck process. In the case of stochastic volatility, the benchmark was given by Monte-Carlo simulations with variance reduction, while the bounds are computed by taking a deterministic time-dependent volatility set equal to the expectation of the volatility process.