Scilab code to estimate Asian call option using the control variates method

Hello everyone,
I need to estimate Asian call option based on the arithmetic mean by using the control variates method.  Since we have the exacte value of the option with geometric mean (Black-Scholes formula), i choosed the geometric mean as a control variates for the arithmetic mean.
The problem is that i'm getting the same values (graph) for the confidence interval limits and the estimate values.
Please help me to fix it.
Thanks in advance.

clear;
clc;
K = 120;
S0 = 100;
r = 0.04;
sigma = 0.4;
sigma2 = sigma^2;
T = 1;
n = 52;
dt = T/n;
t = 0:dt:T;
Nmax = 100;
z = 1.96;
sigman=(sigma/n)*sqrt(((n+1)*(2*n+1))/6);
sigman2=sigman^2;
rn=(r-0.5*sigma2)*(0.5*(n+1)/n)+0.5*sigman2;
d1 = (log(S0/K)+(rn+0.5*sigman2)*T)/(sigman*sqrt(T));
d2 = d1-sigman*sqrt(T);
ECg = exp(-r*T)*(S0*exp(rn*T)*cdfnor("PQ",d1,0,1)-K*cdfnor("PQ",d2,0,1));

function S=f(x)
S = ones(1,n);
for i = 1:n
u = exp((r-0.5*sigma2)*t(i+1)+sigma*x*sqrt(t(i+1)));
S(i)= u;
end
endfunction


function [CI_low, CI_up, CV]=integralCV(N)

S1 = 0;
S2 = 0;
for i = 1:N
u = grand(Nmax,1,"nor",0,1);
St = S0 * f(u(1));
ht1 = max(mean(St)-K,0);
ht2 = max((prod(St))^(1/n)-K,0);
ht = ht1-ht2;
S1 = S1 + exp(-r*T)*ht;
S2 = S2 + (exp(-r*T)*ht)^2;
end
CV = S1 / N + ECg;
stdev = sqrt((1 / (N-1))*( S2 - N*CV^2 ));
CI_low = CV - z * stdev / sqrt(N) ;
CI_up = CV + z * stdev / sqrt(N) ;

endfunction

D = 10:1:Nmax-9;

for i=1:length(D)

[CI_lowerCV(i), CI_upperCV(i), CV(i)] = integralCV(D(i));

clf();
plot2d(log10(D)', [ CI_lowerCV CI_upperCV CV], [ 3 5 2 ]);
legend([  "Lower Bound (CV)" "Upper Bound (CV)" "CV"]);
title("Estimation of E[Ca] by the control variates method");

  • Mathe Mathe
    0

    This is a very advanced problem...

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