Business Intelligence

The British Asian Option

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Executive Summary

Following the economic rationale of [7] and [8] the authors present a new class of Asian options where the holder enjoys the early exercise feature of American options whereupon his payoff (deliverable immediately) is the 'Best prediction' of the European payoff under the hypothesis that the true drift of the stock price equals a contract drift. Inherent in this is a protection feature which is the key to the British Asian option. Should the option holder believe the true drift of the stock price to be unfavorable (based upon the observed price movements) he can substitute the true drift with the contract drift and minimise the losses.

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