5.70 option_asian_levy

Function File: value = option_asian_levy (CallPutFlag, S, X, T, r, sigma, divrate, n)

Compute the prices of european type asian average price call or put options according to Levy (1992) valuation formula. Convert all input parameter into continuously compounded values with act/365 day count convention.

The implementation is based on following literature:

• "Complete Guide to Option Pricing Formulas", Espen Gaarder Haug, 2nd Edition, page 190ff.

Variables:

• CallPutFlag: Call: "1", Put: "0"
• S: stock price at time 0
• X: strike price
• T: time to maturity in days
• r: annual risk-free interest rate (continuous, act/365)
• sigma: annualized implied volatility
• divrate: dividend rate p.a. (continuous, act/365)
• n: number of averaging dates (defaults to continuous: n = number of days to maturity)

See also: option_bs, option_asian_vorst90.