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Pring Fixed-Strike Lookback Options
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 Title & Authors
Pring Fixed-Strike Lookback Options
Lee, Hangsuck;
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 Abstract
A fixed-strike lookback option is an option whose payoff is determined by the maximum (or minimum) price of the underlying asset within the option's life. Under the Black-Scholes framework, the time-t price of an equity asset follows a geometric Brownian motion. Applying the method of Esscher transforms, this paper will derive explicit pricing formulas for fixed-strike lookback call and put options, respectively. In addition, this paper will show a relationship (duality property) between the pricing formulas of the call and put options. Finally, this paper will derive explicit pricing formulas for the fixed-strike lookback options when their underlying asset pays dividends continuously at a rate proportional to its price.
 Keywords
Esscher transforms;fixed-strike lookback option;duality property;Brownian motion;
 Language
English
 Cited by
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