Lookback Options.pptVIP

7.4 Lookback Options 　　　指導教授：戴天時 　　　　報告者：陳博宇 章節結構 7.4.1 Floating Strike Lookback 7.4.2 Black-Scholes-Merton Equation 7.4.3 Reduction of Dimension 7.4.4 Computation of the Price of the　 Lookback Option　　　 　　 Introduction Lookback option: An option whose payoff is Based on the maximum that the underlying asset price attains over some interval of time prior to expiration. Lookback option Fixed Strike Lookback Option 　　　　　　　　　　 Floating Strike Lookback Option 7.4.1 Floating Strike Lookback Option The payoff of this option is the difference between the maximum asset price over the time between initiation and expiration and the asset price at expiration. We begin with a geometric Brownian motion asset price, which may be written as where , . With We define the maximum of the asset price up to time t as , . The payoff is V(T)=Y(T)-S(T) at expiration time T. This payoff is nonnegative because Y(T) S(T). We also define the risk-neutral price of the lookback option Is Because the pair of processes (S(t),Y(t)) has the Markov property , there must exist a function v(t, x, y) such that 已知　　　　　　　　　　 是martingale, 所以 7.4.2 Black-Scholes-Merton Equation Theorem 7.4.1 Let v(t, x, y) denote the price at time t of the floating strike lookback option under the assumption that S(t) = x and Y(t) = y . Then v(t, x, y) satisfies the Black-Scholes-Merton partial differential equation In the region and satisfies the boundary conditions 證明前所需作的準備 We have to proof 　dY(t)dY(t)=0 , dY(t)dS(t)=0 . Y(t) is continuous and nondecreasing in t. Iterated conditioning implies that Is a martingale under . Let be a partition of [0,T ].Then , We conc