Bounds for In-Progress Floating-Strike Asian Options Using Symmetry

Posted: 6 Mar 2008

See all articles by Vicky Henderson

Vicky Henderson

University of Warwick

David Hobson

University of Warwick

William Shaw

King's College, London

Rafal M. Wojakowski

University of Surrey; Lancaster University - Management School

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 coincides with the true price 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.

Keywords: Asian options, Floating strike Asian options, Put call symmetry, Bounds, Change of numéraire

Suggested Citation

Henderson, Vicky and Hobson, David and Shaw, William and Wojakowski, Rafal M., Bounds for In-Progress Floating-Strike Asian Options Using Symmetry. Annals of Operation Research, Vol. 151, No. 1, 2007, Available at SSRN: https://ssrn.com/abstract=1102128

Vicky Henderson (Contact Author)

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom
44 (0)2476 574811 (Phone)

David Hobson

University of Warwick ( email )

CV4 7AL
United Kingdom

William Shaw

King's College, London ( email )

Department of Mathematics
Strand
London, WC2R 2LS
United Kingdom

HOME PAGE: http://www.mth.kcl.ac.uk/staff/w_shaw.html

Rafal M. Wojakowski

University of Surrey ( email )

Faculty of Business, Economics and Law
The Surrey Business School
Guildford, Surrey GU2 7XH
United Kingdom
+44 1483 683477 (Phone)

HOME PAGE: http://www.surrey.ac.uk/sbs/people/rafal_wojakowski/index.htm

Lancaster University - Management School ( email )

Lancaster, LA1 4YX
United Kingdom
+44 (1524) 593630 (Phone)
(01524) 847321 (Fax)

HOME PAGE: http://www.lums.lancs.ac.uk/profiles/rafal-wojakowski/

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