Option with largest payoff and option with smallest payoff

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Monthly closing prices for stock XYZ:

Date : Stock Price

January 31, 2008: 105

February 29, 2008: 120

March 31, 2008:    115

April 30, 2008: 110

May 31, 2008: 115

June 30, 2008: 110

July 31, 2008: 100

August 31, 2008: 90

September 30, 2008: 105

October 31, 2008: 125

November 30, 2008: 110

December 31, 2008: 115

The following are one-year European options on stock XYZ. The options were issued on December 31, 2007.

(i) An arithmetic average Asian call option (the average is calculated based on monthly closing stock prices) with a strike of 100.

(ii) An up-and-out call option with a barrier of 125 and a strike of 120.

(iii) An up-and-in call option with a barrier of 120 and a strike of 110.

Calculate the difference in payoffs between the option with the largest payoff and the option with the smallest payoff.

Reference no: EM131892384

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