The purpose of this paper is to analyse the effect of stochastic interest rates on the pricing of Asian options. It is shown that a stochastic, in contrast to a deterministic, development of the term structure of interest rates has a significant influence. The price of the underlying asset, e.g....

A new, very efficient and fairly simple simulation method for European basket and Asian options under the geometric Brownian motion assumption is presented. It is based on a new control variate method that uses the closed form of the expected payoff conditional on the assumption that the...

This paper analyses the relationship between the level of a return guarantee in an equity-linked pension scheme and the proportion of an investor’s contribution needed to finance this guarantee. Three types of schemes are considered: investment guarantee, contribution guarantee and surplus...

This paper analyses the relationship between the level of a return guarantee in an equity-linked pension scheme and the proportion of an investor's contribution needed to finance this guarantee. Three types of schemes are considered: investment guarantee, contribution guarantee and participation...

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. <p>The emphasis is...</p>

We show that Australian options are equivalent to fixed or floating strike Asian options and consequently that by studying Asian options from the Australian perspective and vice versa, much can be gained. One specific application of this “Australian approach” leads to a natural dimension...

Traditional stock option grant is the most common form of incentive pay in executive compensation. Applying a principal-agent analysis, we find this common practice suboptimal and firms are better off linking incentive pay to average stock prices. Among other benefits, averaging reduces...

As emphasized by the U.S. Dodd-Frank Act and the European MiFID directive, financial institu-

Empirical evidence indicates that commodity prices are mean reverting and exhibit jumps. As some commodity option payoffs involve the arithmetic average of historical commodity prices, we derive an analytical solution to arithmetic Asian options under a mean reverting jump diffusion process. The...

This note derives new expressions for the moments of the average of values taken by Wiener paths at an arbitrary number, N, of discrete times. The expressions are closed summations, which entail only the N-th powers of, and the successive differences between, the moments of the lognormal finite...