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Bounds for Floating-Strike Asian Options using Symmetry

Author

Listed:
  • Vicky Henderson
  • David Hobson
  • William Shaw
  • Rafal Wojakowski

Abstract

This paper studies symmetries between fixed and floating-strike Asian options and exploits this symmetry to derive an upper bound for the price of a floating-strike Asian. This bound only involves fixed-strike Asians and vanillas, and can be computed simply given one of the many efficient methods for pricing fixed-strike Asian options. The bound is exact until after the averaging has begun and again at maturity. The bound is compared to benchmark prices obtained via Monte Carlo simulation in numerical examples.

Suggested Citation

  • Vicky Henderson & David Hobson & William Shaw & Rafal Wojakowski, 2003. "Bounds for Floating-Strike Asian Options using Symmetry," OFRC Working Papers Series 2003mf04, Oxford Financial Research Centre.
  • Handle: RePEc:sbs:wpsefe:2003mf04
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2003mf04.pdf
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    Cited by:

    1. Allen Abrahamson, 2003. "Efficient Path-Dependent Valuation Using Lattices: Fixed and Floating Strike Asian Options," Finance 0305005, EconWPA.

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