Integral price formulas for lookback options
We derive an integral representation of the price formulas for European options whose terminal payoff involves path-dependent lookback variable. The intricacies in the derivation procedures using the partial differential equation techniques stem from the degenerate nature of the pricing models, wher...
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| Format: | Article |
| Language: | English |
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Wiley
2005-01-01
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| Series: | Journal of Applied Mathematics |
| Online Access: | http://dx.doi.org/10.1155/JAM.2005.117 |
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| _version_ | 1832564851001524224 |
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| author | Chenglong Xu Yue Kuen Kwok |
| author_facet | Chenglong Xu Yue Kuen Kwok |
| author_sort | Chenglong Xu |
| collection | DOAJ |
| description | We derive an integral representation of the price formulas for European options whose terminal payoff involves path-dependent lookback variable. The intricacies in the derivation procedures using the 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 a parity relation between the price functions of the floating strike and fixed strike lookback options. |
| format | Article |
| id | doaj-art-c182748727a3494093ff843d5f55badc |
| institution | Kabale University |
| issn | 1110-757X 1687-0042 |
| language | English |
| publishDate | 2005-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Applied Mathematics |
| spelling | doaj-art-c182748727a3494093ff843d5f55badc2025-02-03T01:10:05ZengWileyJournal of Applied Mathematics1110-757X1687-00422005-01-012005211712510.1155/JAM.2005.117Integral price formulas for lookback optionsChenglong Xu0Yue Kuen Kwok1Department of Applied Mathematics, Tongji University, Shanghai 200092, ChinaDepartment of Mathematics, The Hong Kong University of Science and Technology, Kowloon, Hong KongWe derive an integral representation of the price formulas for European options whose terminal payoff involves path-dependent lookback variable. The intricacies in the derivation procedures using the 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 a parity relation between the price functions of the floating strike and fixed strike lookback options.http://dx.doi.org/10.1155/JAM.2005.117 |
| spellingShingle | Chenglong Xu Yue Kuen Kwok Integral price formulas for lookback options Journal of Applied Mathematics |
| title | Integral price formulas for lookback options |
| title_full | Integral price formulas for lookback options |
| title_fullStr | Integral price formulas for lookback options |
| title_full_unstemmed | Integral price formulas for lookback options |
| title_short | Integral price formulas for lookback options |
| title_sort | integral price formulas for lookback options |
| url | http://dx.doi.org/10.1155/JAM.2005.117 |
| work_keys_str_mv | AT chenglongxu integralpriceformulasforlookbackoptions AT yuekuenkwok integralpriceformulasforlookbackoptions |