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Path Dependent Options: The Case of Lookback Options

Author

Listed:
  • Conze, Antoine
  • Viswanathan

Abstract

Lookback options are path dependent contingent claims whose payoffs depend on the extrema of a given security's price over a certain period of time. Using probabilistic tools, the authors derive explicit formulas for various European lookback options and provide some results about their American counterparts. Copyright 1991 by American Finance Association.

Suggested Citation

  • Conze, Antoine & Viswanathan, 1991. " Path Dependent Options: The Case of Lookback Options," Journal of Finance, American Finance Association, vol. 46(5), pages 1893-1907, December.
  • Handle: RePEc:bla:jfinan:v:46:y:1991:i:5:p:1893-907
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    Cited by:

    1. Daehwan Kim & Jin-Yeong Kim, 2011. "Valuing Income-Contingent Loans as Path-Dependent Options," Korean Economic Review, Korean Economic Association, vol. 27, pages 273-291.
    2. Hoi Wong & Yue Kwok, 2003. "Sub-Replication and Replenishing Premium: Efficient Pricing of Multi-State Lookbacks," Review of Derivatives Research, Springer, vol. 6(2), pages 83-106, May.
    3. D. Andricopoulos, Ari & Widdicks, Martin & Newton, David P. & Duck, Peter W., 2007. "Extending quadrature methods to value multi-asset and complex path dependent options," Journal of Financial Economics, Elsevier, vol. 83(2), pages 471-499, February.
    4. Hans-Peter Bermin & Peter Buchen & Otto Konstandatos, 2008. "Two Exotic Lookback Options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 15(4), pages 387-402.
    5. Sagna, Abass, 2011. "Pricing of barrier options by marginal functional quantization," Monte Carlo Methods and Applications, De Gruyter, vol. 17(4), pages 371-398, December.
    6. Curdin Ott, 2014. "Bottleneck options," Finance and Stochastics, Springer, vol. 18(4), pages 845-872, October.
    7. Guthrie, Graeme, 2011. "A note on operating leverage and expected rates of return," Finance Research Letters, Elsevier, vol. 8(2), pages 88-100, June.
    8. Dai, Min & Li, Peifan & Zhang, Jin E., 2010. "A lattice algorithm for pricing moving average barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 542-554, March.
    9. Bjork, Tomas, 2009. "Arbitrage Theory in Continuous Time," OUP Catalogue, Oxford University Press, edition 3, number 9780199574742.
    10. Cheuk, Terry H. F. & Vorst, Ton C. F., 1997. "Currency lookback options and observation frequency: A binomial approach," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 173-187, April.
    11. Carlos Veiga & Uwe Wystup & Manuel Esquível, 2012. "Unifying exotic option closed formulas," Review of Derivatives Research, Springer, vol. 15(2), pages 99-128, July.
    12. Hatem Ben-Ameur & Michèle Breton & Pierre L'Ecuyer, 2002. "A Dynamic Programming Procedure for Pricing American-Style Asian Options," Management Science, INFORMS, vol. 48(5), pages 625-643, May.
    13. repec:dau:papers:123456789/5374 is not listed on IDEAS
    14. Guthrie, Graeme, 2010. "House prices, development costs, and the value of waiting," Journal of Urban Economics, Elsevier, vol. 68(1), pages 56-71, July.
    15. Farid Aitsahlia & Tzeung Le Lai, 1998. "Random walk duality and the valuation of discrete lookback options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 5(3-4), pages 227-240.
    16. Laura Ballotta & Andreas Kyprianou, 2001. "A note on the α-quantile option," Applied Mathematical Finance, Taylor & Francis Journals, vol. 8(3), pages 137-144.
    17. Ballestra, Luca Vincenzo & Pacelli, Graziella & Zirilli, Francesco, 2007. "A numerical method to price exotic path-dependent options on an underlying described by the Heston stochastic volatility model," Journal of Banking & Finance, Elsevier, vol. 31(11), pages 3420-3437, November.
    18. Dmitry Davydov & Vadim Linetsky, 2001. "Pricing and Hedging Path-Dependent Options Under the CEV Process," Management Science, INFORMS, vol. 47(7), pages 949-965, July.
    19. Wong, Hoi Ying & Chan, Chun Man, 2007. "Lookback options and dynamic fund protection under multiscale stochastic volatility," Insurance: Mathematics and Economics, Elsevier, vol. 40(3), pages 357-385, May.
    20. Robert J. Bianchi & Michael E. Drew & Thanula R. Wijeratne, 2010. "Systemic Risk, the TED Spread and Hedge Fund Returns," Discussion Papers in Finance finance:201004, Griffith University, Department of Accounting, Finance and Economics.
    21. Hans-Peter Bermin, 2000. "Hedging lookback and partial lookback options using Malliavin calculus," Applied Mathematical Finance, Taylor & Francis Journals, vol. 7(2), pages 75-100.
    22. Fernandez, Pablo & Ariño, Miguel A., 1996. "Derivados exóticos," IESE Research Papers D/308, IESE Business School.
    23. S. G. Kou & Hui Wang, 2004. "Option Pricing Under a Double Exponential Jump Diffusion Model," Management Science, INFORMS, vol. 50(9), pages 1178-1192, September.
    24. Orozco-Garcia, Carolina & Schmeiser, Hato, 2015. "How sensitive is the pricing of lookback and interest rate guarantees when changing the modelling assumptions?," Insurance: Mathematics and Economics, Elsevier, vol. 65(C), pages 77-93.
    25. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.

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