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The distribution of the average of log-normal variables and exact Pricing of the Arithmetic Asian Options: A Simple, closed-form Formula

Alghalith, Moawia (2019): The distribution of the average of log-normal variables and exact Pricing of the Arithmetic Asian Options: A Simple, closed-form Formula.

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Abstract

We overcome a long-standing obstacle in statistics. In doing so, we show that the distribution of the sum of log-normal variables is log-normal. Furthermore, we offer a breakthrough result in finance. In doing so, we introduce a simple, exact and explicit formula for pricing the arithmetic Asian options. The pricing formula is as simple as the classical Black-Scholes formula.

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