Author(s)

Yuchao Bai, Xin Chen, Yihan Sun and Miaozhu Zhang

Corresponding Author

Yuchao Bai

ABSTRACT

During the COVID 19 pandemic, investors have been suffering from huge risks and losses. In this case, it is necessary to have different types of financial products for them to hedge the risk. The purpose of this study is evaluating spread option and Asian option for S&P500 Index and NASDAQ Index. Lognormal pricing model method and Monte Carlo method are used in this study for option pricing and simulation. Data was obtained from Yahoo Finance and data processing as well as simulations were carried out based on Microsoft Excel. According to data analyze, the following results showed up. By buying both assets in spread option, investors would be able to hedge their risks. Besides, Asia option are cheaper than regular option and may have less risk. However, certain limitations like small sample size (only S&P500 and NASDAQ-100 were taken into consideration) of this study should be noticed. These results shed light on comparation of spread option and Asian option evaluation.

KEYWORDS

Monte Carlo, Spread Option, Asian Option, Lognormal Stock Pricing Model