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

Sang Hyeon Park; Jeong Hoon Kim

doi:10.1016/j.spl.2013.08.002

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

Sang Hyeon Park, Jeong Hoon Kim

Department of Mathematics

Research output: Contribution to journal › Article › peer-review

10 Citations (Scopus)

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
Pages (from-to)	2537-2543
Number of pages	7
Journal	Statistics and Probability Letters
Volume	83
Issue number	11
DOIs	https://doi.org/10.1016/j.spl.2013.08.002
Publication status	Published - 2013 Nov

Bibliographical note

Funding Information:
We thank an anonymous referee for valuable comments and suggestions provided on this paper. The research was supported by the National Research Foundation of Korea Grant NRF-2013R1A1A2A10006693 .

All Science Journal Classification (ASJC) codes

Statistics and Probability
Statistics, Probability and Uncertainty

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10.1016/j.spl.2013.08.002

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

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

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