Term Structure of Prices of Asian Options

Abstract

In the present paper, we will study the pricing of Asian options. The main contribution is the model construction; our model is compatible with market conventions, can be calibrated to observable market data, and computationally tractable, while it is 2-factor and the interest rate is stochastic. The model takes it into account that the interest rate risks can influence the prices of the options in the long run. Thus our model can be used to analyse the term structure, from short to long term, of the prices of the options