On the Equivalence of Floating and Fixed-Strike Asian Options

Henderson, Vicky; Wojakowski, Rafal M.

doi:10.2139/ssrn.293967

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On the Equivalence of Floating and Fixed-Strike Asian Options

Journal of Applied Probability, Vol. 39, No. 2, pp. 391--394, 2002

LUMS Working Paper No. 2001/005

7 Pages Posted: 13 Dec 2001 Last revised: 9 Mar 2008

See all articles by Vicky Henderson

Rafal M. Wojakowski

Lancaster University - Management School; University of Surrey

Abstract

There are two types of Asian options in the financial markets which differ according to the role of the average price. We give a symmetry result between the floating and fixed-strike Asian options. The proof involves a change of numeraire and time reversal of Brownian motion. Symmetries are very useful in option valuation and in this case, the result allows the use of more established fixed-strike pricing methods to price floating-strike Asian options.

Keywords: Asian option, floating-strike Asian option, put call symmetry, change of numeraire, time reversal, Brownian motion

JEL Classification: AMS 2000 SC Primary: 60G44, Secondary: 91B28

Suggested Citation: Suggested Citation

Henderson, Vicky and Wojakowski, Rafal M. and Wojakowski, Rafal M., On the Equivalence of Floating and Fixed-Strike Asian Options. Journal of Applied Probability, Vol. 39, No. 2, pp. 391--394, 2002, LUMS Working Paper No. 2001/005, Available at SSRN: https://ssrn.com/abstract=293967 or http://dx.doi.org/10.2139/ssrn.293967