Asian Basket Spread Options: A New Approximation Based on Stochastic Taylor Expansions
Pricing of Securities
2025-04-25 v3 Mathematical Finance
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.
Keywords
Cite
@article{arxiv.2504.16011,
title = {Asian Basket Spread Options: A New Approximation Based on Stochastic Taylor Expansions},
author = {Fabien Le Floc'h},
journal= {arXiv preprint arXiv:2504.16011},
year = {2025}
}