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Uncertain strike lookback options pricing with floating interest rate

Author

Listed:
  • Lidong Zhang

    (Tianjin University of Science and Technology
    Tianjin University of Science and Technology)

  • Yanmei Sun

    (Tianjin University of Science and Technology)

  • Ziping Du

    (Tianjin University of Science and Technology
    Tianjin University of Science and Technology)

  • Xiangbo Meng

    (Tianjin University of Science and Technology)

Abstract

Considering the floating interest rate and the uncertainty of the strike price, we derive the pricing formulas of lookback options including lookback call option and lookback put option. Furthermore, we give the numerical algorithms to illustrate our results and analyze the relationships between the price of lookback options and all the parameters.

Suggested Citation

  • Lidong Zhang & Yanmei Sun & Ziping Du & Xiangbo Meng, 2021. "Uncertain strike lookback options pricing with floating interest rate," Review of Derivatives Research, Springer, vol. 24(1), pages 79-94, April.
  • Handle: RePEc:kap:revdev:v:24:y:2021:i:1:d:10.1007_s11147-020-09170-4
    DOI: 10.1007/s11147-020-09170-4
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    References listed on IDEAS

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    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    2. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    3. Lanruo Dai & Zongfei Fu & Zhiyong Huang, 2017. "Option pricing formulas for uncertain financial market based on the exponential Ornstein–Uhlenbeck model," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 597-604, March.
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    More about this item

    Keywords

    Uncertain process; Floating interest rate; Uncertain strike price; Lookback option;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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