  This paper studies the pricing of European-style Asian options when the price
dynamics of the underlying risky asset are assumed to follow a Markov-
modulated geometric Brownian motion; that is, the appreciation rate and the
volatility of the underlying risky asset depend on unobservable states of the
economy described by a continuous-time hidden Markov process. We derive the
exact, explicit and closed-form solutions for European-style Asian options in a
two-state regime switching model.
