TY - JOUR
T1 - Closed-form solutions for valuing partial lookback options with random initiation
AU - Kim, Geonwoo
AU - Jeon, Junkee
N1 - Publisher Copyright:
© 2017 Elsevier Inc.
PY - 2018/3
Y1 - 2018/3
N2 - In this paper, we propose new types of partial lookback options, where the underlying asset price has to cross a predetermined barrier to activate the standard lookback option. Reflection principle and Girsanov theorem are used to derive the closed-form pricing formulas for the partial lookback options with random initiation. We also verify our pricing formulas by comparing it with the Monte Carlo simulation results and provide the experiment results with graphs to illustrate the properties of the proposed options with respect to parameters.
AB - In this paper, we propose new types of partial lookback options, where the underlying asset price has to cross a predetermined barrier to activate the standard lookback option. Reflection principle and Girsanov theorem are used to derive the closed-form pricing formulas for the partial lookback options with random initiation. We also verify our pricing formulas by comparing it with the Monte Carlo simulation results and provide the experiment results with graphs to illustrate the properties of the proposed options with respect to parameters.
KW - Closed-form solution
KW - Partial lookback option
KW - Random initiation
UR - http://www.scopus.com/inward/record.url?scp=85030781533&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2017.09.019
DO - 10.1016/j.frl.2017.09.019
M3 - Article
AN - SCOPUS:85030781533
SN - 1544-6123
VL - 24
SP - 199
EP - 220
JO - Finance Research Letters
JF - Finance Research Letters
ER -