Timeline for What are some liquid Asian options markets?
Current License: CC BY-SA 4.0
12 events
| when toggle format | what | by | license | comment | |
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| May 10, 2021 at 20:02 | comment | added | simsalabim | Oh yeah my apologies to you guys @BobJansen | |
| May 10, 2021 at 19:59 | comment | added | Bob Jansen♦ | @simsalabim please keep it civil. I’ve edited and deleted where it wasn’t | |
| Mar 30, 2021 at 5:41 | comment | added | Richard Hardy | @piterbarg, thank you, this was helpful. I had forgotten that many futures expire before the underlying period is over. +1 for your contribution. | |
| Mar 29, 2021 at 18:22 | comment | added | piterbarg | @RichardHardy yes you are right. As to your question, an option that expiries into an average before the average starts is not the same as the option that expiries at the end of the averaging period. so if by X you mean the latter and by Z the former, they will not be a perfect replication of each other. | |
| Mar 29, 2021 at 18:18 | comment | added | Richard Hardy | @piterbarg, I think it is helpful to keep the definitions strict or at least warn explicitly when one departs from them. At the same time, I do see how there is an Asian flavor to what you are recommending and I find the idea interesting. Could you also comment on my idea of a European option on an Asian futures contract (Z)? Would it replicate the Asian option (X)? | |
| Mar 29, 2021 at 18:13 | comment | added | piterbarg | I am not sure what is 'fundamentally' wrong with my statement. An FFF option is an option on an average of financial variables and as such is qualified to be called Asian, in my view. If there are more liquid Asian-style options out there I am happy to be corrected. True, in this case the option expiries before the averaging period kicks in, which is just one of many flavours of the Asian feature. @wecandothis seems to refer to text-book Asian options where the option expiries at the end of the averaging period -- well I agree that these are not like that. | |
| Mar 29, 2021 at 17:45 | comment | added | Richard Hardy | @wecandothis, I am aware of what you say in your two last sentences, but how do they relate to the question of prices of X and Z? Does Z not replicate X? | |
| Mar 29, 2021 at 17:31 | comment | added | simsalabim | This is fundamentally an wrong answer. And no, @RichardHardy, the theoretical prices are not similar. The payoff of an Asian option do not depend on the terminal price but on the average price till maturity. This means that the volatility decreases and thus the option price. | |
| Mar 29, 2021 at 15:35 | comment | added | Richard Hardy | After some thought, an American option on an Asian futures contract (call this option Y) does not seem all that similar to an Asian option (call it X). One reason is that the American option can be exercised at any point. I think this should make the payoffs as well as theoretical prices of X and Y different. However, a European option on an Asian futures contract (call this option Z) does seem quite similar to an Asian option. I would thus expect the payoffs and theoretical prices of X and Z to be close. Does that sound sensible? | |
| Mar 29, 2021 at 15:19 | comment | added | piterbarg | would not go as far as claiming that but among all Asian-like options these struck me as the most liquid. | |
| Mar 29, 2021 at 15:16 | comment | added | Richard Hardy | Are you implying that an American option on an Asian futures contract* is effectively the same as an Asian option on the underlying? *Perhaps that is a wrong label; I mean a futures contract the underlying of which is the average price of something over a given period. | |
| Mar 29, 2021 at 14:28 | history | answered | piterbarg | CC BY-SA 4.0 |