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Article: Options on the minimum or the maximum of two average prices
Title | Options on the minimum or the maximum of two average prices |
---|---|
Authors | |
Keywords | Average-Rate Incentive Contract Option Rainbow Risk Management |
Issue Date | 1999 |
Publisher | Springer 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? |
Abstract | This 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 Identifier | http://hdl.handle.net/10722/177762 |
ISSN | 2023 Impact Factor: 0.7 2023 SCImago Journal Rankings: 0.278 |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Wu, X | en_US |
dc.contributor.author | Zhang, JE | en_US |
dc.date.accessioned | 2012-12-19T09:39:49Z | - |
dc.date.available | 2012-12-19T09:39:49Z | - |
dc.date.issued | 1999 | en_US |
dc.identifier.citation | Review Of Derivatives Research, 1999, v. 3 n. 2, p. 183-204 | en_US |
dc.identifier.issn | 1380-6645 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177762 | - |
dc.description.abstract | This 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.language | eng | en_US |
dc.publisher | Springer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6645 | en_US |
dc.relation.ispartof | Review of Derivatives Research | en_US |
dc.subject | Average-Rate | en_US |
dc.subject | Incentive Contract | en_US |
dc.subject | Option | en_US |
dc.subject | Rainbow | en_US |
dc.subject | Risk Management | en_US |
dc.title | Options on the minimum or the maximum of two average prices | en_US |
dc.type | Article | en_US |
dc.identifier.email | Zhang, JE: jinzhang@hku.hk | en_US |
dc.identifier.authority | Zhang, JE=rp01125 | en_US |
dc.description.nature | link_to_subscribed_fulltext | en_US |
dc.identifier.doi | 10.1023/A:1009658511492 | - |
dc.identifier.scopus | eid_2-s2.0-53149085714 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-53149085714&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 3 | en_US |
dc.identifier.issue | 2 | en_US |
dc.identifier.spage | 183 | en_US |
dc.identifier.epage | 204 | en_US |
dc.publisher.place | United States | en_US |
dc.identifier.scopusauthorid | Wu, X=7408235031 | en_US |
dc.identifier.scopusauthorid | Zhang, JE=7601346659 | en_US |
dc.identifier.issnl | 1380-6645 | - |