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On the Hedging Portfolio of Asian Options

Published online by Cambridge University Press:  29 August 2014

Michel Jacques
Michel Jacques*
Affiliation:
École d'actuariat, Université Laval
*
École d'actuariat, Université Laval Québec, CanadaG1K 7P4, [email protected]
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Abstract

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We give 2 explicit formulae for the hedging portfolio of Asian options. One is based on the usual Lognormal approximation, and the other on an Inverse Gaussian approximation. Both give excellent results as replicating strategies when the parameters of the model are in a reasonable range.

Keywords

Option pricing theoryAsian optionreplicating strategyhedging portfolio
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 26 , Issue 2 , November 1996 , pp. 165 - 183
Copyright
Copyright © International Actuarial Association 1996

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