Geometric Asian Rainbow Option on the Iranian Stock Market

In this paper,, we study a new kind of exotic options called geometric Asian rainbow option on the Iranian stock market. At first, we choose two stocks from the Iranian stock market. Next, we present the price for the two-asset geometric Asian rainbow option under the fractional Brownian motion. Then, our sensitivity analysis of the model parameters such as the risk-free rate and Hurst exponent will be investigated. In addition, we study the effect of these parameters on the price of geometric Asian rainbow option and the results confirm the accuracy of our pricing model. Finally, we compare the price of the geometric Asian rainbow option with those of European, American and Asian analogs. The outcomes show that this new option has a cheaper price in comparison to the mentioned traditional options and also could work better in risk management. Therefore, it can be highly noticed by investors and financial agents.