Simple Chooser Option Evaluation
These authors contributed equally.
- DOI
- 10.2991/assehr.k.211209.469How to use a DOI?
- Keywords
- call option; put option; exotic option; strike price; Black-Scholes Model; straddle
- Abstract
Financial instruments traded in the markets and investors’ situations in such markets are becoming more complex. The paper examines the main aspects of options, emphasizing the variety of exotic options and their place in financial markets and the risk management process. As the exact valuation of exotic options is quite difficult, the article deals with the theoretical and practical aspects of pricing of chooser options that suggest a broad range of usage and application in different market conditions. It gives traders a generic view of European style vs American Style Options and simulates the Simple Black-Scholes Model. It is introduced with the simple example of the pricing of ‘European call options on a no-dividend stock, and the simulation results are compared with an analytical solution. The calculations made in this article showed the price of Apple Inc. (AAPL) at one-year maturity, and it is closely correlated with the chosen time and less correlated with its strike price. Finally, this paper introduces Chooser Options and provides a pricing spreadsheet. Chooser options give the investor the privilege of choosing whether the option is a put or a call at some predetermined date. Generally, the investor chooses the more valuable option.
- Copyright
- © 2021 The Authors. Published by Atlantis Press International B.V.
- Open Access
- This is an open access article under the CC BY-NC license.
Cite this article
TY - CONF AU - Minghan Gao AU - Yifei Yu PY - 2021 DA - 2021/12/15 TI - Simple Chooser Option Evaluation BT - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) PB - Atlantis Press SP - 2892 EP - 2900 SN - 2352-5428 UR - https://doi.org/10.2991/assehr.k.211209.469 DO - 10.2991/assehr.k.211209.469 ID - Gao2021 ER -