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Asian options whose payoff depends not only possibly on the
priceat expirationof the underlying asset, but also on the
average price experienced by the underlying asset during some
portion of the option''s life. In some cases, the underlying
asset price of the option is an average; in others, the strike
price itself is computed as an average of the underlying asset
recent prices. Wheninvestors face a price risk, Asian options
provide a cheaper way to ameliorate anypossible price or rate
distortions. By reexamining the pricing model for forward-
starting Asian options developed by Bouaziz et al. (1994), this
thesis finds their modelcontaining a non-trivial error. This
thesis then derives thecorrect formulation and extends the
methodology to the pricing of forward-startingaverage rate
currency options. We also conduct simulation analysis to
highlightthe significance of the error and investigate how
factors will affect the options.
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