FpML Issues Tracker
closed
Major
Always
Schema
StephenMCanny
iyermakova
Summary
We would like the ability to send Asian Options as Asian rather than European, which we believe is the generic acceptable field value.
European Options have a single expiry date, generally on the final day of a calculation period (Settlement Px vs Strike Px) .
Asian Options take the average price for every day within the calculation period, then exercise/expire this average vs the strike price (Avg Px vs Strike Px).
American Options can be exercised any time within the calculation period. If the option is not exercised during said period then it expires out-of-the-money.
So in a sense we agree that both Asian and Eurpoean expire on the final date within a calculation period, however their Pricing, Risk Profile and MTM as a result is fundamentally different and as such it is imperative that we segregate the two from one another.
Notes:
iyermakova
04/04/19 9:44 am
Hi Stephen,
As per ISDA definitions, “Asian” is the averaging method of price calculation and model in FpML as an additional feature for some applicable European options.
Ex:
<equityExercise>
<equityEuropeanExercise>
<expirationDate>
<adjustableDate>
<unadjustedDate>2002-07-01</unadjustedDate>
<dateAdjustments>
<businessDayConvention>NONE</businessDayConvention>
</dateAdjustments>
</adjustableDate>
</expirationDate>
<equityExpirationTimeType>Close</equityExpirationTimeType>
</equityEuropeanExercise>
<automaticExercise>true</automaticExercise>
<equityValuation>
<valuationTimeType>Close</valuationTimeType>
</equityValuation>
<settlementCurrency>EUR</settlementCurrency>
<settlementType>Cash</settlementType>
</equityExercise>
<feature>
<asian>
<averagingInOut>Out</averagingInOut>
<averagingPeriodOut>
<averagingDateTimes>
<dateTime>2000-08-01T08:57:00</dateTime>
<dateTime>2000-09-01T08:57:00</dateTime>
<dateTime>2000-10-01T08:57:00</dateTime>
<dateTime>2000-11-01T08:57:00</dateTime>
<dateTime>2000-12-01T08:57:00</dateTime>
<dateTime>2001-01-04T08:57:00</dateTime>
<dateTime>2001-02-01T08:57:00</dateTime>
<dateTime>2001-03-01T08:57:00</dateTime>
</averagingDateTimes>
<marketDisruption>ModifiedPostponement</marketDisruption>
</averagingPeriodOut>
</asian>
</feature>
As per IDSA definition and FpML, there are three types of the exercise style of an option: American (can be exercised on any of the dates between the effective and expiration dates), Barbuda (is exercised on one of the specific dates up until the expiration dates) and European (can be exercised on the expiration date)
For example:
<americanExercise id=”americanExercise0″>
<commencementDate>// American can be exercised on any of the dates between the effective and expiration dates
<adjustableDate>
<unadjustedDate>2000-08-30</unadjustedDate>
<dateAdjustments>… </dateAdjustments>
</adjustableDate>
</commencementDate>
<expirationDate>/
<adjustableDate>
<unadjustedDate>2002-08-30</unadjustedDate>
<dateAdjustments>…</dateAdjustments>
</adjustableDate>
</expirationDate>
<europeanExercise>
<expirationDate>
<adjustableDate>
<unadjustedDate>2001-08-30</unadjustedDate> // European Option is exercised on the expiration date
</expirationDate>
<bermudaExerciseDates> >// Barbuda is exercised on one of the expiration dates .
<adjustableDates>
<unadjustedDate>2000-12-28</unadjustedDate>
<unadjustedDate>2001-04-28</unadjustedDate>
<unadjustedDate>2001-08-28</unadjustedDate>
<dateAdjustments>… </dateAdjustments>
</adjustableDates>
</bermudaExerciseDates>
Best Regards,
Irina Yermakova
mgratacos
02/06/20 1:01 pm
AWG 2020-02-06