re : aluminium asian digital options anjam ,
we can use moment matching to find the " effective " volatility and dividend
yield for the average .
then we can apply the european digital option formula . attached please find
the c - code i did
for asian spread option , when i find the effective vol and drift for both
averages then find the option
value by calling the european spread option . you can do just the same for
the asian digital option .
it would be nice to do a monte - carlo , just checking the accuracy of the
approximation .
it was nice to have you here , we are impressed by the work you have done .
keep up the good work .
zimin
enron capital & trade resources corp . - europe
from : anjam ahmad 07 / 27 / 2000 10 : 14 am
to : zimin lu / hou / ect @ ect
cc :
subject : aluminium asian digital options
hi zimin ,
russell placket of mg metals just talked to me about the issue of pricing a
strip of twelve monthly asian digital options on lme aluminium . as i
understand , the payoff to the customer is a fixed cash amount that wil be
paid if the average of the closing prices of aluminium for a month are
greater than the strike agreed in advance , where holiday days do not
contribute to the average .
russell mentioned that this would be a set of 12 monthly options starting in
jan - 01 , and that the lme price for jan - 01 of $ 1572 . 5 ( which is the future
converging to the spot price on the 3 rd wednesday in jan 01 ) can be used as a
proxy / estimate for the average for the month .
do you have a model for asian digitals or should i proceed with monte carlo
to price this , maybe using european digital option model as control variate ?
thanks ,
anjam
x 35383
re : aluminium asian digital options
anjam ,
we can use moment matching to find the " effective " volatility and dividend
yield for the average .
then we can apply the european digital option formula . attached please find
the c - code i did
for asian spread option , when i find the effective vol and drift for both
averages then find the option
value by calling the european spread option . you can do just the same for
the asian digital option .
it would be nice to do a monte - carlo , just checking the accuracy of the
approximation .
it was nice to have you here , we are impressed by the work you have done .
keep up the good work .
zimin
enron capital & trade resources corp . - europe
from : anjam ahmad 07 / 27 / 2000 10 : 14 am
to : zimin lu / hou / ect @ ect
cc :
subject : aluminium asian digital options
hi zimin ,
russell placket of mg metals just talked to me about the issue of pricing a
strip of twelve monthly asian digital options on lme aluminium . as i
understand , the payoff to the customer is a fixed cash amount that wil be
paid if the average of the closing prices of aluminium for a month are
greater than the strike agreed in advance , where holiday days do not
contribute to the average .
russell mentioned that this would be a set of 12 monthly options starting in
jan - 01 , and that the lme price for jan - 01 of $ 1572 . 5 ( which is the future
converging to the spot price on the 3 rd wednesday in jan 01 ) can be used as a
proxy / estimate for the average for the month .
do you have a model for asian digitals or should i proceed with monte carlo
to price this , maybe using european digital option model as control variate ?
thanks ,
anjam
x 35383