Path-dependent game options with Asian features

Peidong Guo, Jizhou Zhang and Qian Wang

Chaos, Solitons & Fractals, 2020, vol. 141, issue C

Abstract: The game option is a special American option, where the option seller has the early exercise right as well as the buyer. The purpose of this paper is to examine the pricing behaviors of a call game option with a floating strike, where the payoff of the option depends on the geometric average value of the underlying assets over the life of the option(i.e., the game option with the Asian feature). We obtain the integral expression of option pricing formula and provide the integral expression for the penalties paid by the option seller. In addition, we derive optimal exercise strategies and continuation regions of options. Finally, the influence of relevant parameters on liquidated damages is analyzed through numerical simulation.

Keywords: Game options; Asian features; American options; Path dependent (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:141:y:2020:i:c:s0960077920308055

DOI: 10.1016/j.chaos.2020.110412

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