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Pricing of the Quanto Game Option with Asian Feature

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

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