Pricing of exotic options using conditional expectation

Abstract

This dissertation discusses the conditional expectation approach for pricing exotic options. In Chapter 1, we present closed-form lower bounds and approximations for the price of arithmetic average Asian options by multiple conditioning. Also, the differences between the price and the lower bounds are estimated using the Monte Carlo method. In Chapter 2, by conditioning, we derive pricing formulas for exotic options on two assets such as basket options, spread options, and exchange options. In Chapter 3, we present recursive formulas for Asian and basket option prices.