Using model-independent lower bounds to improve pricing of asian style options in lévy markets

Griselda Deelstra, Grégory Rayée, Steven Vanduffel*, Jing Yao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


Albrecher et al. (Albrecher, H., Mayer Ph., Schoutens, W. (2008) General lower bounds for arithmetic Asian option prices. Applied Mathematical Finance, 15, 123-149) have proposed model-independent lower bounds for arithmetic Asian options. In this paper we provide an alternative and more elementary derivation of their results. We use the bounds as control variates to develop a simple Monte Carlo method for pricing contracts with Asian-style features. The conditioning idea that is inherent in our approach also inspires us to propose a new semi-analytic pricing approach. We compare both approaches and conclude that these both have their merits and are useful in practice. In particular, we point out that our newly proposed Monte Carlo method allows to deal with Asian-style products that appear in insurance (e.g., unit-linked contracts) in a very efficient way, and outperforms other known Monte Carlo methods that are based on control variates.

Original languageEnglish
Pages (from-to)237-276
Number of pages40
JournalASTIN Bulletin
Issue number2
Publication statusPublished - May 2014


  • Asian-style options
  • conditional expectation
  • control variates
  • stochastic clock

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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