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Bounds for Floating-Strike Asian Options using Symmetry

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  • Vicky Henderson
  • David Hobson
  • William Shaw
  • Rafal Wojakowski

Abstract

This paper studies symmetries between fixed and floating-strike Asian options and exploits this symmetry to derive an upper bound for the price of a floating-strike Asian. This bound only involves fixed-strike Asians and vanillas, and can be computed simply given one of the many efficient methods for pricing fixed-strike Asian options. The bound is exact until after the averaging has begun and again at maturity. The bound is compared to benchmark prices obtained via Monte Carlo simulation in numerical examples.

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Bibliographic Info

Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2003mf04.

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Date of creation: 2003
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Handle: RePEc:sbs:wpsefe:2003mf04

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Web page: http://www.finance.ox.ac.uk
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Cited by:
  1. Allen Abrahamson, 2003. "Efficient Path-Dependent Valuation Using Lattices: Fixed and Floating Strike Asian Options," Finance 0305005, EconWPA.
  2. Li, Minqiang, 2008. "Closed-Form Approximations for Spread Option Prices and Greeks," MPRA Paper 6994, University Library of Munich, Germany.

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