Why delta hedging is easier for asian options

Assignment Help Financial Econometrics

Reference no: EM131240147

1. If a stock price follows geometric Brownian motion, what process does A(t) follow where A(t) is the arithmetic average stock price between time zero and time t?

2. Explain why delta hedging is easier for Asian options than for regular options.

3. Calculate the price of a 1-year European option to give up 100 ounces of silver in exchange for 1 ounce of gold. The current prices of gold and silver are $380 and $4, respectively; the risk-free interest rate is 10% per annum; the volatility of each commodity price is 20%; and the correlation between the two prices is 0.7. Ignore storage costs.

Reference no: EM131240147

Questions Cloud

Determine the truth values of the following statements : Let C be the set of cities in the world, let N be the set of nations in the world, and let P(c, n) be "c is the capital city of n."

Show that if g is less than the risk free rate : How can the value of a forward start put option on a non-dividend-paying stock be calculated if it is agreed that the strike price will be 10% greater than the stock price at the time the option starts?

Company marketing departments : A company's corporate IT department has a hosting platform specifically for systems used by the company's marketing departments at it's different divisions. However, the corporate IT department needed to bill the different divisions for their exac..

Rewrite each statement in if-then form : Earning a grade of C- in this course is a sufficient condition for it to count toward graduation.

Why delta hedging is easier for asian options : If a stock price follows geometric Brownian motion, what process does A(t) follow where A(t) is the arithmetic average stock price between time zero and time t?

Differences between the ipv4 dhcp messages : What were the differences between the IPv4 DHCP messages and the DHCPv6 messages? Examine the captures and explain how DNS can be integrated with DHCP. If you were having problems with DNS, how would you use Nslookup to troubleshoot? Explain your ..

Price of european call on a call and a european put on call : Is a European down-and-out option on an asset worth the same as a European downand-out option on the asset's futures price for a futures contract maturing at the same time as the option?

What impact change in the currency exchange rate would have : Explain what impact the change in the currency exchange rate would have on the project's internal rate of return under this assumption.

Renewable alternatives to oil : Based on the concern that we may be running out of oil, describe at least two renewable alternatives to oil that are currently available and discuss the barriers that keep these alternatives from replacing oil as our primary means of energy.

User Account

All Pages