Paper #680

Title:

Australian Asian options

Authors:

Manuel Moreno and Javier F. Navas

Date:

February 2003

Abstract:

We study European options on the ratio of the stock price to its average and viceversa. Some of these options are traded in the Australian Stock Exchange since 1992, thus we call them Australian Asian options. For geometric averages, we obtain closed-form expressions for option prices. For arithmetic means, we use dierent approximations that produce very similar results.

Keywords:

Asian options, arithmetic average, geometric average, edgeworth expansion, lognormal distribution, gamma distribution

JEL codes:

G13, C15

Area of Research:

Finance and Accounting

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