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Bounds for Floating-Strike Asian Options using Symmetry

Vicky Henderson, David Hobson, William Shaw and Rafal Wojakowski

OFRC Working Papers Series from Oxford Financial Research Centre

Abstract: This paper studies symmetries between fixed and floating-strike Asian options and exploits this symmetry to derive an upper bound for the price of a floating-strike Asian. This bound only involves fixed-strike Asians and vanillas, and can be computed simply given one of the many efficient methods for pricing fixed-strike Asian options. The bound is exact until after the averaging has begun and again at maturity. The bound is compared to benchmark prices obtained via Monte Carlo simulation in numerical examples.

New Economics Papers: this item is included in nep-rmg
Date: 2003
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