Research On Two-Asset Asian Rainbow Option Pricing Under The Fractional Brownian Motion

In recent years, with the continuous development of financial market, a large number of financial products appear. As a hedging tool, option becomes more and more popular among investors for it can avoid risks. With a large number of new options emergence, the investors’ needs of hedge have been satisfied. How to pricing these new options reasonably has been a matter of concern to everyone.The main work of this paper is to establish a new option Pricing model——Asian rainbow options pricing model under fractional Brownian motion, and by multiple variable transformation, we deduced the analytical solution of the Asian rainbow options pricing under fractional Brownian motion. In order to test the validity of the model, we use Monte Carlo method to precede simulation and found that the error between analog value and analytical solution is small, the largest simulated standard deviation is 0.0337, the smallest is 0.0001, which verified the validity of the model. Finally we through the intuitive image discussed the influence of every parameter on the Asian rainbow options price, For example, the higher the risk-free rate, the lower the option price, which is also consistent with the actual.We studied an innovative financial derivatives pricing problem, which has can be guidance for investors. Due to the difficulty of obtaining actual data, the validity is only verified by monte carlo simulation, this is also the deficiency of this article. In the future we can Continue to study rainbow Asian option pricing not just two assets but more, And can also be a further research on the two asset geometry Asian rainbow put options as well as the two asset arithmetic Asian option pricing.