monash_6834.pdf (341.99 kB)
Valuing Bonds with Embedded Average Price Options
journal contribution
posted on 2017-06-07, 04:01 authored by Easton, Stephen A.Average price options are based on the average (either arithmetic or geometric) price of the underlying asset during an option's life. Recently, Australia's largest private bank, the National Australia Bank, and the regional Metway Bank, have issued bonds that contain embedded arithmetic average share index options. The purpose of this paper is to value these options using Monte Carlo simulation, and then to value the bonds themselves. Using a wide range of estimates of the parameters that determine the values of these bonds, it would appear that the fixed-term deposits offered by these same banks represent more profitable investments.
History
Year of first publication
1996Series
Department of Accounting and Finance.Usage metrics
Categories
No categories selectedLicence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC