The Pricing of Forward-starting Asian Options and its Application

• Main Authors: Hsiao, Kuo-Tung, 蕭國棟
• Other Authors: Hwang Dar-yeh
• Format: Others
• Language: zh-TW
• Published: 1997
• Online Access: http://ndltd.ncl.edu.tw/handle/26276863605236012227

碩士 === 國立臺灣大學 === 財務金融學系 === 85 === Asian options whose payoff depends not only possibly on the priceat expirationof the underlying asset, but also on the average price experienced by the underlying asset during some portion of the option''s life. In some cases, the underlying asset price of the option is an average; in others, the strike price itself is computed as an average of the underlying asset recent prices. Wheninvestors face a price risk, Asian options provide a cheaper way to ameliorate anypossible price or rate distortions. By reexamining the pricing model for forward- starting Asian options developed by Bouaziz et al. (1994), this thesis finds their modelcontaining a non-trivial error. This thesis then derives thecorrect formulation and extends the methodology to the pricing of forward-startingaverage rate currency options. We also conduct simulation analysis to highlightthe significance of the error and investigate how factors will affect the options.