ABSTRACT
In this paper, we work under a stochastic volatility model to value options on the maximum of two average prices. In the proposed framework, explicit pricing formulae of options on the maximum of two average prices are obtained. Finally, we perform numerical examples to illustrate the prices of options on the maximum of two average prices and those of options on the maximum of two underlying asset prices.
JEL CLASSIFICATION:
Acknowledgments
The author would like to thank the anonymous referee and the editor for their helpful comments and valuable suggestions that led to several important improvements. All errors are my own responsibility.
Disclosure statement
No potential conflict of interest was reported by the author.