Main category
Economics (General Management)
Abstract
A model is presented for pricing a European lookback call option on a stock index with guaranteed exchange rate (LBCGER). Closed-form formulas exist for pricing certain types of lookback options. For example, assuming that the underlying security earns no dividend.
The method for pricing a lookback call option with guaranteed exchange rate is based on a single factor Monte Carlo approach. The idea of the method is to stochastically generate a large number of discrete sample paths for the underlying security
Further reading
https://ia904703.us.archive.org/11/items/lookbackCall/lookbackCall.pdf
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