Annals of Operations Research

, Volume 151, Issue 1, pp 81–98 | Cite as

Bounds for in-progress floating-strike Asian options using symmetry

  • Vicky Henderson
  • David Hobson
  • William Shaw
  • Rafal Wojakowski
Article

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 coincides with the true price 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.

Keywords

Asian options Floating strike Asian options Put call symmetry Bounds Change of numéraire 

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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Vicky Henderson
    • 1
  • David Hobson
    • 2
  • William Shaw
    • 3
  • Rafal Wojakowski
    • 4
  1. 1.ORFE and Bendheim Center for Finance, E-QuadPrinceton UniversityPrincetonUSA
  2. 2.Department of Mathematical SciencesUniversity of BathBathUK
  3. 3.Department of MathematicsKing”s College London, StrandLondonUK
  4. 4.Department of Accounting and Finance Management SchoolLancaster UniversityLancasterUK

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