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An Analysis of Optimized Asian Options

In: Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)

Author

Listed:
  • Kuijun Chen

    (Jinan University, Jinan University-University of Birmingham Joint Institute)

  • Yanni Lu

    (University of Toronto, Division of Engineering Science)

  • Siyang Zhang

    (Tsinghua University, School of Economics and Management)

Abstract

ABSTRACT Nowadays, the option is an indispensable financial tool in the current financial market. Moreover, the Asian option, as one of the most famous and widely used exotic options, plays a significant role in it. This paper aims to propose a new type of Asian option, which is jointly designed by the authors and makes an improvement based on the regular Asian option better to meet the demands of the current financial market. This paper provides an explicit definition and comprehensive explanation of this new Asian option and explores its unique functions in the financial market compared with the normal Asian option. Furthermore, to verify the effectiveness of the proposed option, this paper selects representative real stock prices and makes some reasonable assumptions. After using Stata to process the data, the performance of the new Asian option is analyzed, and a numerical comparison between the proposed option and the normal Asian option is made. And the effectiveness of the proposed option in mitigating risk is validated. This paper expounds on the proposed option in detail so that readers can develop a deep understanding of it. It also provides some reference for the option issuers to issue new options.

Suggested Citation

  • Kuijun Chen & Yanni Lu & Siyang Zhang, 2022. "An Analysis of Optimized Asian Options," Advances in Economics, Business and Management Research, in: Yushi Jiang & Yuriy Shvets & Hrushikesh Mallick (ed.), Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), pages 1021-1026, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-036-7_150
    DOI: 10.2991/978-94-6463-036-7_150
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