Journal of Applied Science and Engineering

Published by Tamkang University Press


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Hsien-Jen Lin This email address is being protected from spambots. You need JavaScript enabled to view it.1

1Department of Applied Mathematics, Aletheia University, Tamsui, Taiwan 251, R.O.C.


Received: March 30, 2012
Accepted: August 17, 2012
Publication Date: June 1, 2013

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We consider the problem of valuation of certain Asian options in the geometric jump-diffusion models with continuously dividend-paying assets. With the sources of diffusion risks and two primitive tradeable assets, the market in this model is, in general, incomplete, and so, there are more than one equivalent martingale measures and no-arbitrage prices. For this jump-diffusion model, we adopt the minimal martingale measure as the risk-neutral pricing measure for option valuation in a dynamicallyiincomplete market. A partial integro-differential equation satisfied by the no-arbitrage price of an Asian option is obtained by change of numeraire technique under the minimal martingale measure.

Keywords: Asian Options, Jump-diffusion Model, Dividend, Itô’s Formula, Partial Integro-differential Equations


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