Asian Basket Spread Options: A New Approximation Based on Stochastic Taylor Expansions

2025/04/22 by Floc'h, Fabien Le
#FOS: Economics and business #Mathematical Finance (q-fin.MF) #Pricing of Securities (q-fin.PR)

paper · doi:10.48550/arxiv.2504.16011

Abstract

We present closed analytical approximations for the pricing of Asian basket spread options under the Black-Scholes model. The formulae are obtained by using a stochastic Taylor expansion around a log-normal proxy model and are found to be highly accurate for Asian and spread options in practice. Unlike other approaches, they do not require any numerical integration or root solving.

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