Options with more sophisticated rules than those for plain vanillas are called exotic options. There are different types. Path dependent options depend on the whole history of the underlying and not just on the realization at maturity. In particular, we consider barrier options which depend on price levels being attained over a period and Asian options which depend on the average price of the option’s underlying over a period. Furthermore, we look at options which have different exercise styles like compound options which are options on options and swing options which have multiple exercise rights. We assume that the dynamics of the stock price is modeled by a geometric Brownian motion.
KeywordsOption Price Geometric Brownian Motion Barrier Option Asian Option Compound Option
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