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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 introduce a simple, exact and closed-form formula for pricing the arithmetic Asian options. The pricing formula is as simple as the classical Black-Scholes formula. In doing so, we show that the distribution of the continuous average of log-normal variables is log-normal.

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