Hi
For people familiar with Hull's Example 25.3 (8th edition, the Futures) - would appreciate some advice. I was wondering if there's some information missing in that problem/example....when he writes "when 12, 52, 250 observations are used for the average, the price is 6,...." - I'm not sure what F and sigma to use for these observations. Also, for people who have used his Derivagem software, I can't see where I would even enter that information. What am I missing......?
Serving the Quantitative Finance Community
-
- katastrofa
- Posts: 7929
- Joined:
- Location: Event Horizon
Re: Asian option, Hull's example
Are you asking about formulas for discrete forward average price and variance? Here’s the first. The variance derivation takes longer and I just got a parcel from Temu… 
(Apologies for the low quality presentation.)
(Apologies for the low quality presentation.)- Attachments
-
Re: Asian option, Hull's example
Hey @Katastrofa - thanks for the response! No, the derivation is fine...it feels like he left some information out of the question (the example I posted above) so there was no way to complete the second part of the problem - i.e. when the option starts to fix. Appreciate your help with the derivation....must say...pretty neat handwriting!
-
- katastrofa
- Posts: 7929
- Joined:
- Location: Event Horizon
Re: Asian option, Hull's example
OK, just in case, I got approximately the same results as Hull using the calculated first (and second) moment of the discrete average.
Re: Asian option, Hull's example
Oh cool! What did you use for the "12, 52 and 250" observations? I'm referring to the very last line of the text; where are you getting those observations from? That's the piece that I don't get.....
Would really appreciate if you could share your spreadsheet (if feasible).
Would really appreciate if you could share your spreadsheet (if feasible).