On the pricing of Geometric Average and Arithmetic Average Reset Options
碩士 === 國立成功大學 === 統計學系碩博士班 === 97 === An average reset option is a path-dependent option whose strike price can be reset according to the behavior of the average price of the underlying asset. This thesis studies the average reset calls whose strike price will be reset to the prevailing average pric...
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| Format: | Others |
| Language: | en_US |
| Published: |
2009
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| Online Access: | http://ndltd.ncl.edu.tw/handle/55493042893317310932 |
| Summary: | 碩士 === 國立成功大學 === 統計學系碩博士班 === 97 === An average reset option is a path-dependent option whose strike price can be reset according to the behavior of the average price of the underlying asset. This thesis studies the average reset calls whose strike price will be reset to the prevailing average price over the monitoring window if the average price is below the original strike price on the reset date. The discrete geometric average and discrete arithmetic average are considered as the reset triggers. We derive the analytical pricing formula for the discrete geometric average reset call under the risk-neutral valuation. As the observation number goes to infinity, the pricing formula for the continuous geometric average reset call is obtained. For the discrete arithmetic average counterpart, we employ Wilkinson approximation to derive the approximate pricing formula. The simulation result shows that the approximate pricing formula is quite accurate.
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