We study the price of Asian options with floating-strike when the underlying asset price follows a Markov-modulated (or regime-switching) geometric Brownian motion , where both the drift and diffusion coefficients depend on an independent continuous-time finite-state Markov chain. We propose an iterative procedure that converges to the option prices without recourse to solving a coupled PDE system  . Our approach makes use of path properties of Brownian motion and the Fixed-Point Theorem.
We study the price of Asian options with floating-strike when the underlying asset price follows a Markov-modulated (or regime-switching) geometric Brownian motion and both the interest rate and diffusion coefficient depend on an independent continuous-time finite-state Markov chain. We propose an iterative procedure that converges to the option prices without recourse to solving a coupled PDE system . The method can also be applied to fixed-strike Asian options . Our approach makes use of path properties of Brownian motion and the Fixed-Point Theorem.
R
, where both the drift and diffusion coefficients
and both the interest rate and diffusion coefficient
A
. The method can also be applied to fixed-strike Asian options