PATH AVERAGED OPTION VALUE CRITERIA FOR SELECTING BETTER OPTIONSPATH AVERAGED OPTION VALUE CRITERIA FOR SELECTING BETTER OPTIONS
- Other Titles
- PATH AVERAGED OPTION VALUE CRITERIA FOR SELECTING BETTER OPTIONS
- Authors
- 김준석; 유민현; 손혜주; 이승규; 김명현; 최용호; 정다래; 김영록
- Issue Date
- 2016
- Publisher
- 한국산업응용수학회
- Keywords
- Black–Scholes equations; European options; path-averaged option value.
- Citation
- Journal of the Korean Society for Industrial and Applied Mathematics, v.20, no.2, pp.163 - 174
- Indexed
- KCI
- Journal Title
- Journal of the Korean Society for Industrial and Applied Mathematics
- Volume
- 20
- Number
- 2
- Start Page
- 163
- End Page
- 174
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/90493
- DOI
- 10.12941/jksiam.2016.20.163
- ISSN
- 1226-9433
- Abstract
- In this paper, we propose an optimal choice scheme to determine the best option among comparable options whose current expectations are all the same under the condition that an investor has a confidence in the future value realization of underlying assets. For this purpose, we use a path-averaged option as our base instrument in which we calculate the time discounted value along the path and divide it by the number of time steps for a given expected path. First, we consider three European call options such as vanilla, cash-or-nothing, and assetor- nothing as our comparable set of choice schemes. Next, we perform the experiments using historical data to prove the usefulness of our proposed scheme. The test suggests that the pathaveraged option value is a good guideline to choose an optimal option.
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Collections - College of Science > Department of Mathematics > 1. Journal Articles
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