Integral price formulas for lookback options
نویسنده
چکیده
We derive general integral representation of the price formulas for European options whose terminal payoff involves path dependent lookback variables. The intricacies in the derivaiton procedures using partial differential equation techniques stem from the degenerate nature of the pricing models, where the lookback state variables appear only in the auxiliary conditions but not in the governing differential equations. We also derive parity relation between the price functions of the floating strike and fixed strike lookback options.
منابع مشابه
Random walk duality and the valuation of discrete lookback options
Lookback options are popular in OTC markets for currency hedging. The payoff of a lookback option depends on the minimum or maximum price of the underlying asset over the life of the contract. When the extreme values are continuously monitored, these options can be valued analytically (Conze and Viswanathan, 1991; Goldman et al., 1979a,b). On the other hand, when the maximum or the minimum is o...
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