A mathematical simulation of Asian options on the Tokyo Grain Exchange

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A mathematical simulation of Asian options on the Tokyo Grain Exchange

Please use this identifier to cite or link to this item: http://hdl.handle.net/10355/14353

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Title: A mathematical simulation of Asian options on the Tokyo Grain Exchange
Author: Wiles, Phoebe Shyla
Keywords: financial derivatives
exotic options
emerging markets
non-GMO soybeans
Date: 2011
Publisher: University of Missouri--Columbia
Abstract: Financial derivatives have had a phenomenal growth in trading and research in the last three decades. New markets, with niche products have created interesting trading opportunities. The Tokyo Grain Exchange created a non-GMO soybean futures market in 2001, yet have delayed in creating an options market to accompany the futures contract. The non-GMO soybean market is thinly traded and has possible price manipulations. Also the market suffers from high volatility. Therefore an exotic derivative could benefit this market highly. Through mathematically simulation two Asian (averaging) rate options are compared through measures of dispersion to the Black-Scholes option and the futures market. The research proves that averaging rate options consistently had lower income volatility as well as increased stability in yearly fluctuations over the actual futures contract. This study has also displayed that thinly traded markets can have large variances in the futures price near-contract maturation. Lastly the study has shown with the high fluctuation in soybean prices near contract maturity, an averaging rate options can help protect against possible market manipulation.
URI: http://hdl.handle.net/10355/14353
Other Identifiers: WilesP-072711-T235

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