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Asian Options With The American Early Exercise Feature

Author

Listed:
  • LIXIN WU

    (Department of Mathematics, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, China)

  • YUE KUEN KWOK

    (Department of Mathematics, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, China)

  • HONG YU

    (Department of Information Systems, School of Computing, National University of Singapore, 10 Kent Ridge Crescent, 119260, Singapore)

Abstract

By appropriate scaling of the variables, the reduction in the dimensionality of the partial differential equation formulation of an American-style Asian option model is achieved. The integral representation of the early exercise premium can be obtained in a succinct manner. The exercise policy of Asian options with the early exercise provision can then be examined.

Suggested Citation

  • Lixin Wu & Yue Kuen Kwok & Hong Yu, 1999. "Asian Options With The American Early Exercise Feature," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 101-111.
    • Handle: RePEc:wsi:ijtafx:v:02:y:1999:i:01:n:s021902499900008x
    DOI: 10.1142/S021902499900008X
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    Citations

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    Cited by:

    1. Zhang, Wei-Guo & Li, Zhe & Liu, Yong-Jun, 2018. "Analytical pricing of geometric Asian power options on an underlying driven by a mixed fractional Brownian motion," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 402-418.
    2. Kailin Ding & Zhenyu Cui & Xiaoguang Yang, 2023. "Pricing arithmetic Asian and Amerasian options: A diffusion operator integral expansion approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(2), pages 217-241, February.
    3. Min Dai & Yue Kuen Kwok, 2006. "Characterization Of Optimal Stopping Regions Of American Asian And Lookback Options," Mathematical Finance, Wiley Blackwell, vol. 16(1), pages 63-82, January.
    4. Daniel Sevcovic & Martin Takac, 2011. "Sensitivity analysis of the early exercise boundary for American style of Asian options," Papers 1101.3071, arXiv.org.
    5. Andrea Pascucci, 2008. "Free boundary and optimal stopping problems for American Asian options," Finance and Stochastics, Springer, vol. 12(1), pages 21-41, January.
    6. Li, Zhe & Zhang, Wei-Guo & Liu, Yong-Jun, 2018. "Analytical valuation for geometric Asian options in illiquid markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 507(C), pages 175-191.
    7. Tomas Bokes, 2010. "A unified approach to determining the early exercise boundary position at expiry for American style of general class of derivatives," Papers 1012.0348, arXiv.org, revised Mar 2011.
    8. Tomas Bokes & Daniel Sevcovic, 2009. "Early exercise boundary for American type of floating strike Asian option and its numerical approximation," Papers 0912.1321, arXiv.org.

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    JEL classification code G130;

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