Monte Carlo methods and variance reduction techniques on floating Asian options

Abstract

In this work, Monte Carlo simulations coded in Python are used to estimate short-term floating Asian options. Afterwards, variance reduction techniques are used on the Monte Carlo simulations to reduce their variance and to compare those estimates to the first and second approximation formulas by Alòs and León. Finally, an analysis of the volatility of each technique and the errors of both approximation formulas is performed.