Economics, Econometrics and Finance
6 years ago

New formula revolutionizes pricing of average options on commodities!

Pricing Average Options on Commodities
Kenichiro Shiraya, Akihiko Takahashi

Paper Summary

A new formula was developed to price average options on commodities with changing volatility. The formula works for different stochastic volatility models and was tested with numerical examples, showing it accurately prices average options.

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