On the Equivalence of Floating and Fixed-Strike Asian Options

Journal of Applied Probability, Vol. 39, No. 2, pp. 391--394, 2002

LUMS Working Paper No. 2001/005

7 Pages Posted: 13 Dec 2001 Last revised: 9 Mar 2008

See all articles by Vicky Henderson

Vicky Henderson

University of Warwick

Rafal M. Wojakowski

University of Surrey; Lancaster University - Management School

Abstract

There are two types of Asian options in the financial markets which differ according to the role of the average price. We give a symmetry result between the floating and fixed-strike Asian options. The proof involves a change of numeraire and time reversal of Brownian motion. Symmetries are very useful in option valuation and in this case, the result allows the use of more established fixed-strike pricing methods to price floating-strike Asian options.

Keywords: Asian option, floating-strike Asian option, put call symmetry, change of numeraire, time reversal, Brownian motion

JEL Classification: AMS 2000 SC Primary: 60G44, Secondary: 91B28

Suggested Citation

Henderson, Vicky and Wojakowski, Rafal M., On the Equivalence of Floating and Fixed-Strike Asian Options. Journal of Applied Probability, Vol. 39, No. 2, pp. 391--394, 2002, LUMS Working Paper No. 2001/005, Available at SSRN: https://ssrn.com/abstract=293967 or http://dx.doi.org/10.2139/ssrn.293967

Vicky Henderson

University of Warwick ( email )

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

Rafal M. Wojakowski (Contact Author)

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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