Research Summary
Research Summary
Hedging Asian Options: Closed-Form Solutions Using the Malliavin Calculus
Description
Hedging path-dependent options requires non-standard tools because the price processes no longer have smooth stochastic differentials. I show how the Malliavin calculus can be used to overcome the specific difficulties introduced by the averaging behavior of Asian options. Whereas previous applications of the Mallivin calculus to the hedging of Asian options required simulation methods for implementation, I derive closed-form expressions for the delta and gamma of an Asian option in a Black Scholes economy.