Head
of the Research Center for Financial Engineering,
Institute of Economic Research, Kyoto University
Professor Takeaki Kariya
Kamizono,
K. Kariya, T. Liu, R. and Nakatsuma, T. (1999).
A new control variate Estimator for an
Asian option. (submitted)
abstract
There exist several estimators for valuing the Asian option on the arithmetic
mean. Among all variance reduction estimators, the one with the control variate derived from the
geometric mean has been shown by Boyle, Broadie and Glasserman
(1997) to perform best so far. In this paper a new improved control variate estimator for this type of Asian option
is proposed and investigated Simulation results confirm that it does perform better than
the control variate derived from the geometric mean.
The improvement becomes more significant as the volatility increases and/or as the time to expiration lengthens.
