Pricing Asian options for NIG and VG Levy markets

Abstract

In this work, we study the value of an Asian option in the case of exponential Levy markets. More specifically, we are interested in the NIG (normal inverse Gaussian) the VG (variance gamma) models. The exponential Levy models produce incomplete markets. There are therefore an infinite number of equivalent martingale measures. We are interested in two methods of constructing of the risk-neutral measures. The first is based on the Esscher transform, and the other consists of bringing a risk-neutral correction on the dynamics of the trajectories. It turns out, according to the numerical results obtained, that the two methods generally produce the same prices.