Stabsseminar ved Jørgen Aase Nielsen

Professor Jørgen Aase Nielsen, Aarhus Universitet, holder stabsseminar ved Institutt for foretaksøkonomi fredag 29.10.

28.10.1999 - Elin F. Styve

Tema er Pricing of Asian Exchange Rate Options under Stochastic Interest
Rates as a Sum of Options

Tid og sted:
Fredag 29. oktober kl. 1215 - 1330 i møterommet, 9. etasje

Abstract
The aim of the paper is to develop pricing formulas for long term European type Asian options written on the exchange rate in a two currency economy. The exchange rate as well as the foreign and domestic zero coupon bond prices are assumed to follow geometric Brownian motions.
The main emphasis is devoted to the discretely sampled Asian option. It is shown how the value of this option can be approximated as the sum of Black-Scholes options. The formula is obtained under the extension of
results developed by Rogers and Shi (1995) and Jamshidian (1991). In addition bounds for the pricing error are determined. Comparing with Monte Carlo simulation the pricing is found to be very precise.

Paper kan hentes hos Turid Gabrielsen på rom C512, (tlf. 55959284) eller
epost: Turid Gabrielsen