### Abstract

In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.

Original language | English |
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Pages (from-to) | 2537-2543 |

Number of pages | 7 |

Journal | Statistics and Probability Letters |

Volume | 83 |

Issue number | 11 |

DOIs | |

Publication status | Published - 2013 Nov 1 |

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### All Science Journal Classification (ASJC) codes

- Statistics and Probability
- Statistics, Probability and Uncertainty

### Cite this

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*Statistics and Probability Letters*, vol. 83, no. 11, pp. 2537-2543. https://doi.org/10.1016/j.spl.2013.08.002

**A semi-analytic pricing formula for lookback options under a general stochastic volatility model.** / Park, Sang Hyeon; Kim, Jeong-Hoon.

Research output: Contribution to journal › Article

TY - JOUR

T1 - A semi-analytic pricing formula for lookback options under a general stochastic volatility model

AU - Park, Sang Hyeon

AU - Kim, Jeong-Hoon

PY - 2013/11/1

Y1 - 2013/11/1

N2 - In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.

AB - In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black-Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.

UR - http://www.scopus.com/inward/record.url?scp=84883186572&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84883186572&partnerID=8YFLogxK

U2 - 10.1016/j.spl.2013.08.002

DO - 10.1016/j.spl.2013.08.002

M3 - Article

AN - SCOPUS:84883186572

VL - 83

SP - 2537

EP - 2543

JO - Statistics and Probability Letters

JF - Statistics and Probability Letters

SN - 0167-7152

IS - 11

ER -