Averaging Options for Capping Total Costs

Peter Ritchken; L. Sankarasubramanian; Anand M. Vijh

doi:10.2307/3665823

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Averaging Options for Capping Total Costs

Journal article

Peer reviewed

Averaging Options for Capping Total Costs

Peter Ritchken, L. Sankarasubramanian and Anand M. Vijh

Financial management, Vol.19(3), pp.35-41

10/01/1990

DOI: 10.2307/3665823

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Abstract

In many situations traders may be keen to place caps or floors on aggregate price risks of ongoing transactions over finite time periods. In such circumstances, hedging strategies involving ordinary options and futures may not be satisfactory and other contracts may be desirable. These contracts are path-dependent contracts whose payouts are based on the average price and are encountered in over-the-counter markets. The economic role and valuation of these contracts are examined, and these contracts are contrasted with strategies involving ordinary options.

Average prices

Binomials

Call options

Contracts

Financial portfolios

Interest rates

Options contracts

Purchasing

Sequencing

Topics in Financing and Financial Innovations

Total costs

Details

Title: Subtitle: Averaging Options for Capping Total Costs
Creators: Peter Ritchken
L. Sankarasubramanian
Anand M. Vijh
Resource Type: Journal article
Publication Details: Financial management, Vol.19(3), pp.35-41
Publisher: Financial Management Association
DOI: 10.2307/3665823
ISSN: 0046-3892
eISSN: 1755-053X
Language: English
Date published: 10/01/1990
Academic Unit: Finance
Record Identifier: 9984380733602771

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