The Hartman-Watson Distribution revisited: Asymptotics for Pricing Asian Options
Stefan Gerhold
TL;DR
This paper refines the understanding of the Hartman-Watson distribution by deriving its density asymptotics, enabling more accurate Asian option pricing within the Black-Scholes framework.
Contribution
It provides the first asymptotic analysis of the Hartman-Watson distribution's density, improving option pricing models.
Findings
Asymptotics of the Hartman-Watson density derived
Enhanced accuracy in Asian option pricing
Refinement of previous distribution asymptotics
Abstract
Barrieu, Rouault, and Yor [J. Appl. Probab. 41 (2004)] determined asymptotics for the logarithm of the distribution function of the Hartman-Watson distribution. We determine the asymptotics of the density. This refinement can be applied to the pricing of Asian options in the Black-Scholes model.
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Taxonomy
TopicsStochastic processes and financial applications · Insurance, Mortality, Demography, Risk Management · Financial Risk and Volatility Modeling