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Influence of the Price of the Underlying Instrument on the Risk of the Asset-or-Nothing Option

In: Country Experiences in Economic Development, Management and Entrepreneurship

Author

Listed:
  • Ewa Dziawgo

    (Nicolaus Copernicus University)

Abstract

Asset-or-nothing options are the singular payoffs options in the class of exotic options. Exotic options are a specifically attractive financial instrument due to different income structure from that provided by standard options. Asset-or-nothing option provide their holders the right to own the underlying asset if the options expire in-the-money. The article presents the properties of the asset-or-nothing option: construction of instrument, types of options, the pay-off function, the pricing model, the influence of the price of the underlying instrument on the pricing and value measures of risk (coefficients delta, gamma, vega, theta, rho). The objective of the work is to present the analysis of the impact of the underlying instrument’s price on the risk performance of the asset-or-nothing options. The empirical illustration included in the article is concerned with the pricing simulations of the currency asset-or-nothing options on EUR/USD.

Suggested Citation

  • Ewa Dziawgo, 2017. "Influence of the Price of the Underlying Instrument on the Risk of the Asset-or-Nothing Option," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis & Ender Demir & Ugur Can (ed.), Country Experiences in Economic Development, Management and Entrepreneurship, pages 673-687, Springer.
    • Handle: RePEc:spr:eurchp:978-3-319-46319-3_42
    DOI: 10.1007/978-3-319-46319-3_42
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    More about this item

    Keywords

    Derivatives; Risk management; Measures of risk;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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