Static Hedging of Asian Options under Lévy Models: The Comonotonicity Approach

In this paper we present a simple static super-hedging strategy for the payoff of an arithmetic Asian option in terms of a portfolio of European options. Moreover, it is shown that the obtained hedge is optimal in some sense. The strategy is based on stop-loss transforms and is applicable under general stock price models. We focus on some popular Lévy models. Numerical illustrations of the hegding performance are given for various Lévy models calibrated to market data of the S&P 500. ∗Departement of Mathematics, Graz University of Technology, Steyrergasse 30, A-8010 Graz, Austria. E-mail: [email protected] †K.U.Leuven, Naamsestraat 69, B-3000 Leuven, Belgium. E-mail: [email protected] ‡K.U.Leuven, Naamsestraat 69, B-3000 Leuven, Belgium. E-mail: [email protected] §K.U.Leuven, U.C.S., W. De Croylaan 54, B-3001 Leuven, Belgium. E-mail: [email protected]