Integral price formulas for lookback options | Zendy

Chenglong Xu | Zendy; Yue Kuen Kwok | Zendy

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Integral price formulas for lookback options

Author(s) -

Chenglong Xu,

Yue Kuen Kwok

Publication year - 2005

Publication title -

journal of applied mathematics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.307

H-Index - 43

eISSN - 1687-0042

pISSN - 1110-757X

DOI - 10.1155/jam.2005.117

Subject(s) - mathematics , stochastic game , variable (mathematics) , differential (mechanical device) , representation (politics) , mathematical economics , degenerate energy levels , mathematical analysis , physics , thermodynamics , quantum mechanics , politics , political science , law

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

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