Equivalent Martingale Measure in Asian Geometric Average Option Pricing
Yonggang Zhu
Abstract
Open-access reader
Yonggang Zhu
Abstract
Open-access reader
The general situation of the Black-Scholes Option Pricing Model was discussed under the assumption of the arbitrage-free market, and the pricing of Asian geometric average options with fixed strike price was analyzed at any valid time. Consequently, the price formula of the Asian geometric average options was drawn using the equivalent martingale measure and the significance of the study was also indicated.
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The general situation of the Black-Scholes Option Pricing Model was discussed under the assumption of the arbitrage-free market, and the pricing of Asian geometric average options with fixed strike price was analyzed at any valid time. Consequently, the price formula of the Asian geometric average options was drawn using the equivalent martingale measure and the significance of the study was also indicated.
Key concepts: Martingale (probability theory), Martingale pricing, Asian option, Black–Scholes model, Economics, Risk-neutral measure, Arbitrage, Mathematical economics