Advances in Economics, Management and Political Sciences

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Proceedings of the 2nd International Conference on Financial Technology and Business Analysis

Series Vol. 97 , 02 July 2024


Open Access | Article

A Study of Asian Chooser Options in a General Two-Period Binomial Model

Yurong Sun * 1 , Yufan Zhang 2 , Zhouqi Jiang 3
1 Faculty of Natural, Mathematical & Engineering Sciences, King’s College London, Strand, London, WC2R 2LS, UK
2 Hangzhou New Channel Agency, Hangzhou, 310005, China
3 International Education College. Shanghai University of Finance and Economics, Shanghai, 200433, China

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 97, 55-62
Published 02 July 2024. © 02 July 2024 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Yurong Sun, Yufan Zhang, Zhouqi Jiang. A Study of Asian Chooser Options in a General Two-Period Binomial Model. AEMPS (2024) Vol. 97: 55-62. DOI: 10.54254/2754-1169/97/20231581.

Abstract

Asian options are also known as average price options, and their strike price is the average price of the stock in the market half a day before the strike. Binomial model is a good model to identify the value of options, The paper develops the theory of Asian chooser options in the two-period binomial model. There are Asian call options, and Asian put options. We first derive the binomial model of the Asian option and get the portfolio function. After that, we get the number of bond and stock, Nb and Ns. We study the problem via five different cases in the two-period Binomial model. In these five cases, we choose the maximum value between Asian put and call options. Then, we decide whether they are call options or put options. Then, we calculate the number of portfolios in these five cases in the two-period binomial model. Finally, we implemented the whole project with Python.

Keywords

Asian options, two-period binomial model, stock

References

1. Lu S. From binomial option pricing model to Black-Sholes option pricing model[M]. Lamar University-Beaumont, 2011.

2. Vecer J. A new PDE approach for pricing arithmetic average Asian options[J]. Journal of computational finance, 2001, 4(4): 105-113.

3. Levendorskii, S. Z., & Xie, J.. (2012). Pricing of discretely sampled Asian options under levy processes. SSRN Electronic Journal.

4. Alziary B, Décamps J P, Koehl P F. A PDE approach to Asian options: analytical and numerical evidence[J]. Journal of Banking & Finance, 1997, 21(5): 613-640.

5. Vorst, T., Kemna, A. G. Z., & Vorst, A. C. F. (1990). A pricing method for options based on average asset values. Journal of Banking & Finance, 14(1), 113-129.

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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Volume Title
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
ISBN (Print)
978-1-83558-505-4
ISBN (Online)
978-1-83558-506-1
Published Date
02 July 2024
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/97/20231581
Copyright
02 July 2024
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated