Subleading correction to the asian options volatility in the black-scholes model

INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE(2023)

Cited 0|Views1
No score
Abstract
The short maturity limit T -> 0 for the implied volatility of an Asian option in the Black-Scholes model is determined by the large deviations property for the time-average of the geometric Brownian motion. In this note, we derive the subleading O(T) correction to this implied volatility, using an asymptotic expansion for the Hartman-Watson distribution. The result is used to compute subleading corrections to Asian options prices in a small maturity expansion, sharpening the leading order result obtained using large deviations theory. We demonstrate good numerical agreement with precise benchmarks for Asian options pricing in the Black-Scholes model.
More
Translated text
Key words
asian options volatility,subleading correction
AI Read Science
Must-Reading Tree
Example
Generate MRT to find the research sequence of this paper
Chat Paper
Summary is being generated by the instructions you defined