1-4 September 2015
Angers - France
Europe/Paris timezone

An Analytical Approximation for Pricing VWAP Options

4 Sep 2015, 09:50
40m
Angers - France

Angers - France

Speaker

Prof. Masaaki Kijima (Tokyo Metropolitan University)

Description

This paper proposes a unified approximation method for various options whose payoffs depend on the volume weighted average price (VWAP). Despite their popularity in practice, quite few pricing models have been developed in the literature. Also, in previous works, the underlying asset process has been restricted to a geometric Brownian motion. In contrast, our method is applicable to the general class of continuous Markov processes such as local volatility models, stochastic volatility models, and their combinations. Moreover, our method can be used for any type of VWAP options with fixed-strike, floating-strike, continuously sampled, discretely sampled, forward-start, and in-progress transactions. (joint work with H. Funahashi)

Primary author

Prof. Masaaki Kijima (Tokyo Metropolitan University)

Presentation Materials