I have some ideas about Asian options that I would like to test with historical market data. I am therefore looking for some fairly liquid Asian options markets, preferably ones with publicly available price data. Question: Does anyone know any examples of such markets and sources of corresponding price data?

Background: I have no prior experience with Asian options, so I looked up some 10-15 textbooks (with the 3 "mildly successful" hits listed below) and a few papers but did not get very far. I hope someone here will have a suggestion or two.

  • Fabozzi et al. (eds) "The Handbook of Commodity Investing" (2008) pp. 590-591 (p. 604-605) says Asian options are available and popular for oil.

  • Geman "Agricultural Finance" (2015) pp. 95-100 says Asian options are particularly appropriate for commodity markets and, unsurprisingly, represent a large fraction of the options traded in these markets.

  • Geman "Risk Management in Commodity Markets" (2009) pp. 159 gives an example of Asian options at IMAREX (a freight market).

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    $\begingroup$ They love Asian options in the commodities markets! Furthermore; you can construct the pay off of asian options and backtest your strat on oil futures and such. There wouldn't be much public data regarding asian options because it's mainly traded OTC and oil firms hire traders to hedge their position. $\endgroup$ – simsalabim Mar 29 at 13:04
  • $\begingroup$ @wecandothis, yes, I can construct the payoff from futures, but I cannot construct the actual options' prices which I need. Which commodities markets do you have in mind? $\endgroup$ – Richard Hardy Mar 29 at 13:12
  • $\begingroup$ I believe freight derivatives also tend to have Asian features due to many contracts depending on averages, see for example this article. However, I am not familiar with data sources. $\endgroup$ – Daneel Olivaw Mar 29 at 13:30
  • $\begingroup$ @RichardHardy you mean theoretical pricing of the Asian options? $\endgroup$ – simsalabim Mar 29 at 14:24
  • $\begingroup$ @wecandothis, I mean market prices, not theoretical prices. $\endgroup$ – Richard Hardy Mar 29 at 15:08

I would guess options on FedFund futures are the world's most liquid Asian options. Here is the spec for FedFund futures: https://www.cmegroup.com/trading/interest-rates/stir/30-day-federal-fund_contract_specifications.html you can see they settle into

arithmetic average of daily effective federal funds rates during contract month

So the FefFund future options are then, in effect, Asian options on the effective fed funds rate. These are traded on CME where, I guess, you can find prices and other relevant info (although I have not looked for historical data there)

  • $\begingroup$ 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. $\endgroup$ – Richard Hardy Mar 29 at 15:16
  • $\begingroup$ would not go as far as claiming that but among all Asian-like options these struck me as the most liquid. $\endgroup$ – piterbarg Mar 29 at 15:19
  • $\begingroup$ 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? $\endgroup$ – Richard Hardy Mar 29 at 15:35
  • $\begingroup$ This is fundamentally an wrong answer. And no, @RichardHardy, the theoretical prices are not similar. I would expect more of an associate professor. 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. $\endgroup$ – simsalabim Mar 29 at 17:31
  • $\begingroup$ @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? $\endgroup$ – Richard Hardy Mar 29 at 17:45

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