Pricing of the Quanto Game Option with Asian Feature

Guo Peidong

doi:doi:10.11648/j.jfa.20200803.15

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Pricing of the Quanto Game Option with Asian Feature

Guo Peidong

Published in Journal of Finance and Accounting (Volume 8, Issue 3)

Received: 20 April 2020 Published: 8 June 2020

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Abstract

The game option, which is also known as Israel option, is a new type of American option to give the option writer the right to cancel the contract before the maturity. This article studies the pricing behaviors of the quanto game option with Asian features based on partial differential equation and the stochastic analysis. The Asian feature in an option model refers to the payoff of the option depends on both the average asset price over the life of the option. The quanto options (currency-translated foreign equity options) are contingent claims where the payoff depends on exchange rate level at the option exercise time. The Asian quanto game options can be regarded as double-barrier European options for the features that both the holder and the writer can exercises the options contract at any time over the life of the option. We derive the pricing equation and provide the integral expression of pricing formula for the option. The option price is decomposed into the corresponding European option price and the penalty paid by the option writer for an early callable and the penalty paid by the option holder for early exercise of the option. In addition, we discuss optimal exercise strategies and continuation regions of the option.

Published in	Journal of Finance and Accounting (Volume 8, Issue 3)
DOI	10.11648/j.jfa.20200803.15
Page(s)	143-147
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

American Option, Quanto Game Option, Asian Feature, Callable Strategy

References

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APA Style

Guo Peidong. (2020). Pricing of the Quanto Game Option with Asian Feature. Journal of Finance and Accounting, 8(3), 143-147. https://doi.org/10.11648/j.jfa.20200803.15

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ACS Style

Guo Peidong. Pricing of the Quanto Game Option with Asian Feature. J. Finance Account. 2020, 8(3), 143-147. doi: 10.11648/j.jfa.20200803.15

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AMA Style

Guo Peidong. Pricing of the Quanto Game Option with Asian Feature. J Finance Account. 2020;8(3):143-147. doi: 10.11648/j.jfa.20200803.15

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@article{10.11648/j.jfa.20200803.15,
  author = {Guo Peidong},
  title = {Pricing of the Quanto Game Option with Asian Feature},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {3},
  pages = {143-147},
  doi = {10.11648/j.jfa.20200803.15},
  url = {https://doi.org/10.11648/j.jfa.20200803.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200803.15},
  abstract = {The game option, which is also known as Israel option, is a new type of American option to give the option writer the right to cancel the contract before the maturity. This article studies the pricing behaviors of the quanto game option with Asian features based on partial differential equation and the stochastic analysis. The Asian feature in an option model refers to the payoff of the option depends on both the average asset price over the life of the option. The quanto options (currency-translated foreign equity options) are contingent claims where the payoff depends on exchange rate level at the option exercise time. The Asian quanto game options can be regarded as double-barrier European options for the features that both the holder and the writer can exercises the options contract at any time over the life of the option. We derive the pricing equation and provide the integral expression of pricing formula for the option. The option price is decomposed into the corresponding European option price and the penalty paid by the option writer for an early callable and the penalty paid by the option holder for early exercise of the option. In addition, we discuss optimal exercise strategies and continuation regions of the option.},
 year = {2020}
}

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TY  - JOUR
T1  - Pricing of the Quanto Game Option with Asian Feature
AU  - Guo Peidong
Y1  - 2020/06/08
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200803.15
DO  - 10.11648/j.jfa.20200803.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 143
EP  - 147
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200803.15
AB  - The game option, which is also known as Israel option, is a new type of American option to give the option writer the right to cancel the contract before the maturity. This article studies the pricing behaviors of the quanto game option with Asian features based on partial differential equation and the stochastic analysis. The Asian feature in an option model refers to the payoff of the option depends on both the average asset price over the life of the option. The quanto options (currency-translated foreign equity options) are contingent claims where the payoff depends on exchange rate level at the option exercise time. The Asian quanto game options can be regarded as double-barrier European options for the features that both the holder and the writer can exercises the options contract at any time over the life of the option. We derive the pricing equation and provide the integral expression of pricing formula for the option. The option price is decomposed into the corresponding European option price and the penalty paid by the option writer for an early callable and the penalty paid by the option holder for early exercise of the option. In addition, we discuss optimal exercise strategies and continuation regions of the option.
VL  - 8
IS  - 3
ER  -

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Author Information

Guo Peidong

School of Management, Shanghai University of Engineering Science, Shanghai, China

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APA Style

Guo Peidong. (2020). Pricing of the Quanto Game Option with Asian Feature. Journal of Finance and Accounting, 8(3), 143-147. https://doi.org/10.11648/j.jfa.20200803.15

Copy | Download

ACS Style

Guo Peidong. Pricing of the Quanto Game Option with Asian Feature. J. Finance Account. 2020, 8(3), 143-147. doi: 10.11648/j.jfa.20200803.15

Copy | Download

AMA Style

Guo Peidong. Pricing of the Quanto Game Option with Asian Feature. J Finance Account. 2020;8(3):143-147. doi: 10.11648/j.jfa.20200803.15

Copy | Download

@article{10.11648/j.jfa.20200803.15,
  author = {Guo Peidong},
  title = {Pricing of the Quanto Game Option with Asian Feature},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {3},
  pages = {143-147},
  doi = {10.11648/j.jfa.20200803.15},
  url = {https://doi.org/10.11648/j.jfa.20200803.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200803.15},
  abstract = {The game option, which is also known as Israel option, is a new type of American option to give the option writer the right to cancel the contract before the maturity. This article studies the pricing behaviors of the quanto game option with Asian features based on partial differential equation and the stochastic analysis. The Asian feature in an option model refers to the payoff of the option depends on both the average asset price over the life of the option. The quanto options (currency-translated foreign equity options) are contingent claims where the payoff depends on exchange rate level at the option exercise time. The Asian quanto game options can be regarded as double-barrier European options for the features that both the holder and the writer can exercises the options contract at any time over the life of the option. We derive the pricing equation and provide the integral expression of pricing formula for the option. The option price is decomposed into the corresponding European option price and the penalty paid by the option writer for an early callable and the penalty paid by the option holder for early exercise of the option. In addition, we discuss optimal exercise strategies and continuation regions of the option.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Pricing of the Quanto Game Option with Asian Feature
AU  - Guo Peidong
Y1  - 2020/06/08
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200803.15
DO  - 10.11648/j.jfa.20200803.15
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 143
EP  - 147
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200803.15
AB  - The game option, which is also known as Israel option, is a new type of American option to give the option writer the right to cancel the contract before the maturity. This article studies the pricing behaviors of the quanto game option with Asian features based on partial differential equation and the stochastic analysis. The Asian feature in an option model refers to the payoff of the option depends on both the average asset price over the life of the option. The quanto options (currency-translated foreign equity options) are contingent claims where the payoff depends on exchange rate level at the option exercise time. The Asian quanto game options can be regarded as double-barrier European options for the features that both the holder and the writer can exercises the options contract at any time over the life of the option. We derive the pricing equation and provide the integral expression of pricing formula for the option. The option price is decomposed into the corresponding European option price and the penalty paid by the option writer for an early callable and the penalty paid by the option holder for early exercise of the option. In addition, we discuss optimal exercise strategies and continuation regions of the option.
VL  - 8
IS  - 3
ER  -

Copy | Download