New market innovation offers cheaper and less volatile hedging options.
Conditional Asian options are a new type of financial product that offer cheaper and less volatile alternatives to regular Asian options. These options are based on average asset prices above a certain threshold, making them attractive for hedging and risk management in equity-linked life insurance products. Previous pricing methods relied on simulations, but this study introduces an analytical approach to calculate prices and deltas for conditional Asian options. The research also explores distributional properties related to the occupation time and geometric Brownian motion.