Pricing and Hedging Asian Basket Spread Options
In this paper we consider the problem of pricing a general Asian basket spread option. We develop approximations formulae based on comonotonicity theory and moment matching methods. We compare their relative performances and explain how to choose the best approximation technique as a function of the Asian basket spread characteristics. We also give the Greeks for our proposed methods. In the last section we extend our results to options denominated in foreign currency.
|Date of creation:||2008|
|Date of revision:|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: Av. F.D., Roosevelt, 39, 1050 Bruxelles|
Phone: (32 2) 650 30 75
Fax: (32 2) 650 44 75
Web page: http://difusion.ulb.ac.be
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Griselda Deelstra & Jan Liinev & Michèle Vanmaele, 2004. "Pricing of arithmetic basket options by conditioning," ULB Institutional Repository 2013/7600, ULB -- Universite Libre de Bruxelles.
- David Hobson & Peter Laurence & Tai-Ho Wang, 2005. "Static-arbitrage upper bounds for the prices of basket options," Quantitative Finance, Taylor & Francis Journals, vol. 5(4), pages 329-342.
- Chen, X. & Deelstra, G. & Dhaene, J. & Vanmaele, M., 2008. "Static super-replicating strategies for a class of exotic options," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1067-1085, June.
- Bjerksund, Petter & Stensland, Gunnar, 2006. "Closed form spread option valuation," Discussion Papers 2006/20, Department of Business and Management Science, Norwegian School of Economics.
- Kaas, Rob & Dhaene, Jan & Goovaerts, Marc J., 2000. "Upper and lower bounds for sums of random variables," Insurance: Mathematics and Economics, Elsevier, vol. 27(2), pages 151-168, October.
- Simon, S. & Goovaerts, M. J. & Dhaene, J., 2000. "An easy computable upper bound for the price of an arithmetic Asian option," Insurance: Mathematics and Economics, Elsevier, vol. 26(2-3), pages 175-183, May.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eca:wpaper:2008_004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.