Options with extreme strikes

In this short paper, we study the asymptotics for the price of call options for very large strikes and put options for very small strikes. The stock price is assumed to follow the Black-Scholes models. We analyze European, Asian, American, Parisian and perpetual options and conclude that the tail as...

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Bibliographic Details
Published in:Risks (Basel) 2015-09, Vol.3 (3), p.234-249
Main Author: Zhu, Lingjiong
Format: Article
Language:English
Subjects:
Asymptotic methods
Black-Scholes models
extreme strikes
Manycountries
option pricing
Options trading
Risk exposure
Stock prices
Studies
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Summary:In this short paper, we study the asymptotics for the price of call options for very large strikes and put options for very small strikes. The stock price is assumed to follow the Black-Scholes models. We analyze European, Asian, American, Parisian and perpetual options and conclude that the tail asymptotics for these option types fall into four scenarios.
ISSN:2227-9091
2227-9091
DOI:10.3390/risks3030234