Search icone
Search and publish your papers

Valorization of the Asian options

Or download with : a doc exchange

About the author

General public

About the document

Published date
documents in English
19 pages
General public
0 times
Validated by
0 Comment
Rate this document
  1. Case study of Carriere and Nivert
  2. Model-based analysis of five forces of Porter
  3. Mapping
  4. Recommendations for the companies

For several years, financial products gained importance increasingly in the financial world. Much of the expansion of financial markets since the 1980s is directly attributed to the development of the industry of these products. In this regard, the derivatives markets have become the engine of many financial innovations and the focus of most investors of different types. The first organized futures exchange was created in 1973, by the CBOE (Chicago Board Options Exchange) and members of the CBOT (Chicago Board Of Trade) in the United States.

In this work, the study a particular derivative: the Asian option. This option is much studied by scientists and mathematicians since the 1980s. A derivative is a contract whose value is "derived" from the price of a financial asset, generally the assets traded in the spot market, "such as stocks, bonds, money market instruments, or commodities". There are different kinds of derivative contracts, based on many different financial instruments. For example, stock prices, foreign exchange, interest rates, the difference between two prices, or even derived products. The combination of products is almost endless. They are used for two operations: the hedging and speculative transactions or trading on the market. The derivative action, for example, can give right but not the obligation to purchase one share at a fixed price before a certain date.

In these circumstances, the value of interest is directly linked to stock price that is "underlying", and we have an option to purchase. If the bond price rises, then the right to buy at a fixed price becomes more interesting and if it drops, the right to buy at a fixed price becomes less interesting. Among the most actively traded derivatives, one can find options to buy or sell (call or put) and offer a particular advantage to an investor and a right to exercise the option to buy or sell. It can be bought or sold at a lower price than that offered on the spot market. There are different types of options that are created to meet the needs of increasingly complicated stakeholders.

At that time there was no form of analytical solutions quite clear to the proper value Asian options, a failure due to the peculiar property of these options, because the claims log-normal collapse every time that it speaks of a calculation of the sum of the prices of which are underlying random and correlated log-normal. In other words, the difficulty in pricing of Asian options is the case where the arithmetic does not follow the log-normal when the X i follow the log-normal standard. Thereafter it is difficult to derive analytically the probability distributions. Therefore the widespread use of digital techniques to assess Asian options seems an adequate solution.

In this section a review will be conducted on the literature by presenting the different methods of calculation of Asian options. Numerical methods: Asian options are created to address the weakness of European options. Indeed, operators manipulate the prices of underlying assets when the contracts of vanilla options are approaching their end dates to generate quick profits. So as has been said before, there is not a simple analytical expression to calculate the price of these options, unlike European options which can be evaluated easily with the Black-Scholes.

Tags: valorization of Asian options; methods of calcualtion of Asian options; analytical solutions; difficulty in pricing Asian options

Similar documents you may be interested in reading.


 Economics & finance   |  Finance   |  Presentation   |  01/16/2009   |   .doc   |   5 pages

The Business Gateway to Qatar 2006

 Economics & finance   |  Economics   |  Presentation   |  09/29/2010   |   .doc   |   102 pages

Top sold for finance

International finance distribution of currency of AUD and USD

 Economics & finance   |  Finance   |  Worksheets   |  08/05/2017   |   .doc   |   4 pages

Financial Analysis of Southwest Airlines and United Airlines

 Economics & finance   |  Finance   |  Case study   |  09/29/2010   |   .pdf   |   14 pages