Valuing Asian Options Using Vorst's Approximation

Abstract

Asian options are options based on some average of the underlying asset price. Generally, an Asian option is an option whose payoff depends on the average price of the underlying asset during a pre-specified period within the option’s lifetime, and a pre-specified observation frequency. We implement Vorst’s method in valuing these options and give the relevant formulas for the Delta and Gamma. We also list some pseudo VBA code.