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Article: Options on the minimum or the maximum of two average prices

TitleOptions on the minimum or the maximum of two average prices
Authors
Wu, XZhang, JE
KeywordsAverage-Rate
Incentive Contract
Option
Rainbow
Risk Management
Issue Date1999
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6645
Citation
Review Of Derivatives Research, 1999, v. 3 n. 2, p. 183-204 How to Cite?
DOI: http://dx.doi.org/10.1023/A:1009658511492
AbstractThis paper studies options on the minimum/maximum of two average prices. We provide a closedform pricing formula for the option with geometric averaging starting at any time before maturity. We show overwhelming numerical evidence that the variance reduction technique with the help of the above closed-form solution dramatically improves the accuracy of the simulated price of an option with arithmetic averaging. The proposed options are found widely applicable in risk management and in the design of incentive contracts. The paper also discusses some parity relationships within the family of average-rate options and provides the upper and lower bounds for the proposed options with arithmetic averaging. © 2000 Kluwer Academic Publishers,.
Persistent Identifierhttp://hdl.handle.net/10722/177762
ISSN
1380-6645
2023 Impact Factor: 0.7
2023 SCImago Journal Rankings: 0.278
References
References in Scopus

 

DC FieldValueLanguage
dc.contributor.authorWu, Xen_US
dc.contributor.authorZhang, JEen_US
dc.date.accessioned2012-12-19T09:39:49Z-
dc.date.available2012-12-19T09:39:49Z-
dc.date.issued1999en_US
dc.identifier.citationReview Of Derivatives Research, 1999, v. 3 n. 2, p. 183-204en_US
dc.identifier.issn1380-6645en_US
dc.identifier.urihttp://hdl.handle.net/10722/177762-
dc.description.abstractThis paper studies options on the minimum/maximum of two average prices. We provide a closedform pricing formula for the option with geometric averaging starting at any time before maturity. We show overwhelming numerical evidence that the variance reduction technique with the help of the above closed-form solution dramatically improves the accuracy of the simulated price of an option with arithmetic averaging. The proposed options are found widely applicable in risk management and in the design of incentive contracts. The paper also discusses some parity relationships within the family of average-rate options and provides the upper and lower bounds for the proposed options with arithmetic averaging. © 2000 Kluwer Academic Publishers,.en_US
dc.languageengen_US
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6645en_US
dc.relation.ispartofReview of Derivatives Researchen_US
dc.subjectAverage-Rateen_US
dc.subjectIncentive Contracten_US
dc.subjectOptionen_US
dc.subjectRainbowen_US
dc.subjectRisk Managementen_US
dc.titleOptions on the minimum or the maximum of two average pricesen_US
dc.typeArticleen_US
dc.identifier.emailZhang, JE: jinzhang@hku.hken_US
dc.identifier.authorityZhang, JE=rp01125en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1023/A:1009658511492-
dc.identifier.scopuseid_2-s2.0-53149085714en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-53149085714&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume3en_US
dc.identifier.issue2en_US
dc.identifier.spage183en_US
dc.identifier.epage204en_US
dc.publisher.placeUnited Statesen_US
dc.identifier.scopusauthoridWu, X=7408235031en_US
dc.identifier.scopusauthoridZhang, JE=7601346659en_US
dc.identifier.issnl1380-6645-

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