Two Exotic Lookback Options
(2008) In Applied Mathematical Finance 15(4). p.387-402- Abstract
- This paper formally analyses two exotic options with lookback features, referred to as extreme spread lookback options and look‐barrier options, first introduced by Bermin. The holder of such options receives partial protection from large price movements in the underlying, but at roughly the cost of a plain vanilla contract. This is achieved by increasing the leverage through either floating the strike price (for the case of extreme spread options) or introducing a partial barrier window (for the case of look‐barrier options). We show how to statically replicate the prices of these hybrid exotic derivatives with more elementary European binary options and their images, using new methods first introduced by Buchen and Konstandatos. These... (More)
- This paper formally analyses two exotic options with lookback features, referred to as extreme spread lookback options and look‐barrier options, first introduced by Bermin. The holder of such options receives partial protection from large price movements in the underlying, but at roughly the cost of a plain vanilla contract. This is achieved by increasing the leverage through either floating the strike price (for the case of extreme spread options) or introducing a partial barrier window (for the case of look‐barrier options). We show how to statically replicate the prices of these hybrid exotic derivatives with more elementary European binary options and their images, using new methods first introduced by Buchen and Konstandatos. These methods allow considerable simplification in the analysis, leading to closed‐form representations in the Black–Scholes framework. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/a3ef5c0f-3b35-4e0c-97cd-7c9ba264e52e
- author
- Bermin, Hans-Peter LU ; Buchen, Peter and Konstandatos, Otto
- publishing date
- 2008
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- exotic options, lookback options, barrier options, option pricing, method of images
- in
- Applied Mathematical Finance
- volume
- 15
- issue
- 4
- pages
- 16 pages
- publisher
- Routledge
- external identifiers
-
- scopus:47749155213
- ISSN
- 1350-486X
- DOI
- 10.1080/13504860802012824
- language
- English
- LU publication?
- no
- id
- a3ef5c0f-3b35-4e0c-97cd-7c9ba264e52e
- date added to LUP
- 2017-01-21 17:19:03
- date last changed
- 2022-03-09 00:08:04
@article{a3ef5c0f-3b35-4e0c-97cd-7c9ba264e52e,
abstract = {{This paper formally analyses two exotic options with lookback features, referred to as extreme spread lookback options and look‐barrier options, first introduced by Bermin. The holder of such options receives partial protection from large price movements in the underlying, but at roughly the cost of a plain vanilla contract. This is achieved by increasing the leverage through either floating the strike price (for the case of extreme spread options) or introducing a partial barrier window (for the case of look‐barrier options). We show how to statically replicate the prices of these hybrid exotic derivatives with more elementary European binary options and their images, using new methods first introduced by Buchen and Konstandatos. These methods allow considerable simplification in the analysis, leading to closed‐form representations in the Black–Scholes framework.}},
author = {{Bermin, Hans-Peter and Buchen, Peter and Konstandatos, Otto}},
issn = {{1350-486X}},
keywords = {{exotic options; lookback options; barrier options; option pricing; method of images}},
language = {{eng}},
number = {{4}},
pages = {{387--402}},
publisher = {{Routledge}},
series = {{Applied Mathematical Finance}},
title = {{Two Exotic Lookback Options}},
url = {{http://dx.doi.org/10.1080/13504860802012824}},
doi = {{10.1080/13504860802012824}},
volume = {{15}},
year = {{2008}},
}