Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022)

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Optimal Oil-based Exotic Options Strategies Under the Background of War: An Empirical Study in the Context of the Russia-Ukraine Conflict

Authors
Zhuocheng Shen1, *
1School of Economics, Yunnan University, Kunming, 650500, China
*Corresponding author. Email: shenzhuocheng@mail.ynu.edu.cn
Corresponding Author
Zhuocheng Shen
Available Online 1 July 2022.
DOI
10.2991/aebmr.k.220603.158How to use a DOI?
Keywords
Exotic options; Strategies; War
Abstract

This paper discusses what kinds of oil-based exotic options will have the best performance under the background of wars, and suggests some exotic options combinations to improve overall performance. In order to draw a conclusion, this research takes the percentage return of each strategy as the key index to make a comparison. Therefore, the first thing in this research is to use Generalized Autoregressive Conditional Heteroskedasticity (GARCH) Model to obtain the volatility of underlying asset, and use Monte Carlo Simulation to value each option on the assumption that the crude oil futures prices follow Geometric Brownian Motion. Then, according to the actual price path, the percentage return of each strategy can be calculated to get the result. What is found in this research is that it is risky to invest only in a single option, except fixed lookback options, because the prices of crude oil futures fluctuate and do not always remain at a favourable level. However, if the constructed portfolio contains Asian options with average strike price in the opposite direction, the overall performance will be better. As a result, when some similar cases happen in the future, it is suggested that investors can choose fixed lookback options or portfolios consisting of some other exotic options with average strike price Asian options in different directions.

Copyright
© 2022 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license.

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Volume Title
Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
1 July 2022
ISBN
10.2991/aebmr.k.220603.158
ISSN
2352-5428
DOI
10.2991/aebmr.k.220603.158How to use a DOI?
Copyright
© 2022 The Authors. Published by Atlantis Press International B.V.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license.

Cite this article

risenwbib
TY  - CONF
AU  - Zhuocheng Shen
PY  - 2022
DA  - 2022/07/01
TI  - Optimal Oil-based Exotic Options Strategies Under the Background of War: An Empirical Study in the Context of the Russia-Ukraine Conflict
BT  - Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022)
PB  - Atlantis Press
SP  - 954
EP  - 961
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220603.158
DO  - 10.2991/aebmr.k.220603.158
ID  - Shen2022
ER  -