fm3_chapter23.2asian

fm3_chapter23.2asian - UN-11IASIAN OPTION PICTUREInitial...

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Unformatted text preview: UN-11IASIAN OPTION PICTUREInitial stock price30Up1.4Down0.8R, 1+interest rate1.08Exercise price50State prices0.4321###0.4938###Risk-neutral probabilities0.4667###0.5333###115.25#MACRO?Stock price82.3258.8065.86#MACRO?42.0047.0430.0033.6037.63#MACRO?24.0026.8819.2021.50#MACRO?15.3612.29#MACRO?1.3605#MACRO?Bond price1.25971.16641.3605#MACRO?1.08001.25971.00001.16641.36051.08001.25971.16641.36051.25971.3605quqdudABCDEFGHIJ123456789101112131415161718192021222324252627282930313233343536PRICING AN ASIAN OPTION BY PRICING ALL THE PATHSInitial stock price30Up1.40Down0.80Interest1.08Option exercise price30#MACRO?0.4321####MACRO?0.4938####MACRO?Risk-neutral prob., Up0.4667###Risk-neutral prob., Down0.5333#####STOCK PRICEPathsPeriod1Period2 Period3 Period4Period1 Period2 Period3 Period4All up (1 path)upupupup30.0042.0058.8082.32115.2565.6735.670.0474One down (4 paths)downupupup30.0024.0033.6047.0465.8640.1010.100.0542updownupup30.0042.0033.6047.0465.8643.7013.700.0542upupdownup30.0042.0058.8047.0465.8648.7418.740.0542upupupdown30.0042.0058.8082.3265.8655.8025.800.0542Two down (6 paths)downdownupup30.0024.0019.2026.8837.6327.540.000.0619downupdownup30.0024.0033.6026.8837.6330.420.420.0619downupupdown30.0024.0033.6047.0437.6334.454.450.0619updowndownup30.0042.0033.6026.8837.6334.024.020.0619upupdowndown30.0042.0058.8047.0437.6343.0913.090.0619updownupdown30.0042.0033.6047.0437.6338.058.050.0619Three down (4 paths)updowndowndown30.0042.0033.6026.8821.5030.800.800.0708downupdowndown30.0024.0033.6026.8821.5027.200.000.0708downdownupdown30.0024.0019.2026.8821.5024.320.000.0708downdowndownup30.0024.0019.2015.3621.5022.010.000.0708Four down (1 path)downdowndowndown30.0024.0019.2015.3612.2920.1720....
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fm3_chapter23.2asian - UN-11IASIAN OPTION PICTUREInitial...

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