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Australian Asian options

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  • Manuel Moreno
  • Javier F. Navas

Abstract

We study European options on the ratio of the stock price to its average and viceversa. Some of these options are traded in the Australian Stock Exchange since 1992, thus we call them Australian Asian options. For geometric averages, we obtain closed-form expressions for option prices. For arithmetic means, we use dierent approximations that produce very similar results.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/680.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 680.

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Date of creation: Feb 2003
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Handle: RePEc:upf:upfgen:680

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Asian options; arithmetic average; geometric average; edgeworth expansion; lognormal distribution; gamma distribution;

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  1. Vorst, Ton, 1992. "Prices and hedge ratios of average exchange rate options," International Review of Financial Analysis, Elsevier, vol. 1(3), pages 179-193.
  2. Merton, Robert C., 1973. "An asymptotic theory of growth under uncertainty," Working papers 673-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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  4. Asbjørn T. Hansen & Peter Løchte Jørgensen, 2000. "Analytical Valuation of American-Style Asian Options," Management Science, INFORMS, vol. 46(8), pages 1116-1136, August.
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  7. Nielsen, J. Aase & Sandmann, Klaus, 2003. "Pricing Bounds on Asian Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(02), pages 449-473, June.
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  12. Klaus Sandmann & J. Aase Nielsen, 2002. "Pricing of Asian exchange rate options under stochastic interest rates as a sum of options," Finance and Stochastics, Springer, vol. 6(3), pages 355-370.
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  16. Milevsky, Moshe Arye & Posner, Steven E., 1998. "Asian Options, the Sum of Lognormals, and the Reciprocal Gamma Distribution," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 409-422, September.
  17. Peter Ritchken & L. Sankarasubramanian & Anand M. Vijh, 1993. "The Valuation of Path Dependent Contracts on the Average," Management Science, INFORMS, vol. 39(10), pages 1202-1213, October.
  18. Yor, Marc, 1993. "From planar Brownian windings to Asian options," Insurance: Mathematics and Economics, Elsevier, vol. 13(1), pages 23-34, September.
  19. Kemna, A. G. Z. & Vorst, A. C. F., 1990. "A pricing method for options based on average asset values," Journal of Banking & Finance, Elsevier, vol. 14(1), pages 113-129, March.
  20. Levy, Edmond, 1992. "Pricing European average rate currency options," Journal of International Money and Finance, Elsevier, vol. 11(5), pages 474-491, October.
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