English, Article, Journal or magazine article edition: The British Asian Option Kristoffer Glover; Goran Peskir; Farman Samee

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/6355
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The British Asian Option
Author
  • Kristoffer Glover
  • Goran Peskir
  • Farman Samee
Physical Description
  • preprint
Notes
  • Following the economic rationale of [7] and [8] we present a new class of Asian options where the holder enjoys the early exercise feature of American options whereupon his payoff (deliverable immediately) is the ?best prediction? of the European payoff under the hypothesis that the true drift of the stock price equals a contract drift. Inherent in this is a protection feature which is key to the British Asian option. Should the option holder believe the true drift of the stock price to be unfavourable (based upon the observed price movements) he can substitute the true drift with the contract drift and minimise his losses. The practical implications of this protection feature are most remarkable as not only is the option holder afforded a unique protection against unfavourable stock price movements (covering the ability to sell in a liquid market completely endogenously) but also when the stock price movements are favourable he will generally receive high returns. We derive a closed form expression for the arbitrage-free price in terms of the rational exercise boundary and show that the rational exercise boundary itself can be characterised as the unique solution to a nonlinear integral equation. Using these results we perform a financial analysis of the British Asian option that leads to the conclusions above and shows that with the contract drift properly selected the British Asian option becomes a very attractive alternative to the classic (European) Asian option.
  • British Asian option; American Asian option; European Asian option; fixed/​floating strike; arithmetic/​geometric average; flexible Asian options; arbitrage-free price; rational exercise boundary; liquid/​illiquid market; geometric Brownian motion; the Shiryaev process; optimal stopping, parabolic free-boundary problem; nonlinear integral equation; local time-space calculus
  • RePEc:uts:rpaper:249
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment