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Analytical Approximate Solutions to American Barrier and Lookback Option Values

Research output: Chapters, Conference Papers, Creative and Literary WorksRGC 12 - Chapter in an edited book (Author)peer-review

Abstract

In this chapter, we present analytical approximate solutions to the values of American barrier options and American lookback strike options. In barrier options, one specifies a barrier. Once the value of the underlying asset reaches the barrier, the "out" barrier option becomes worthless and the "in" barrier option becomes alive. Lookback options are path-dependent options whose payoff depends on the maximum or the minimum realized value of the underlying asset over the life of the option. Our theoretical predictions for the values of these American-style exotic options are in excellent agreement with the results obtained from direct numerical computations.
Original languageEnglish
Title of host publicationHandbook of numerical analysis
Subtitle of host publicationSpecial Volume: Mathematical Modeling and Numerical Methods in Finance
EditorsAlain Bensoussan, Qiang Zhang
PublisherElsevier
Pages665-684
Volume15
ISBN (Print)978-0-444-51879-8
DOIs
Publication statusPublished - 2009

Publication series

NameHandbook of Numerical Analysis
PublisherElsevier BV * North-Holland
ISSN (Print)1570-8659

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