Discrete Barrier and Lookback Options
نویسنده
چکیده
Discrete barrier and lookback options are among the most popular path-dependent options in markets. However, due to the discrete monitoring policy almost no analytical solutions are available for them. We shall focus on the following methods for discrete barrier and lookback option prices: (1) Broadie–Yamamoto method based on fast Gaussian transforms. (2) Feng–Linetsky method based on Hilbert transforms. (3) A continuity correction approximation. (4) Howison–Steinberg approximation based on the perturbation method. (5) A Laplace inversion method based on Spitzer’s identity. This survey also contains a new (more direct) derivation of a constant related to the continuity correction approximation.
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