Arithmetic Asian options pricing using general lattice method

Abstract

The aim of this thesis is to study the pricing of path-dependent discrete arithmetic Asian options. In the case of arithmetic Asian options, the option price cannot be found analytically and various numerical methods must be used to find the price. The theoretical part of this thesis focuses on the general lattice method proposed in 2020 by Gambaro, Kyriakou, and Fusai for pricing European and American style Asian options with fixed and floating strike prices. The novelty of this approach is that by a change of numeraire, lattice becomes one dimensional, while previous lattice methods were two dimensional. In addition, this thesis also examines the pricing of Asian options using Monte Carlo simulations and Hull-White method. Numerical examples compare the accuracy and computation speed of option prices obtained by general lattice method, the Hull-White method and the Monte Carlo method.