Floating Strike LookBack Put Options Example: John buys Floating Strike LookBack Put Options when the underlying asset is trading at $100. A variant of floating strike lookback options are partial lookback options, with payoff (S T −αN D)+ and (αM D −S T)+ for call and put options respectively, where the constant α ∈ (0,1] denotes the degree of partiality. Notes. Floating Strike Lookback Options: The lookback call (put) option gives the holder the right to buy (sell) an asset at its lowest (highest) price observed during the life of the option. Lookback Put Option A put option giving the holder the right (but not the obligation) to sell the underlying asset on or by the expiration date at the highest price that occurs between the start of the option and the time it is exercised. S max) of the asset price over the duration of the option lifetime, depending upon whether the option is a call or put: Supported Equity Derivative Functions Asian Option. Without loss of generality, a floating strike lookback put option is used to illustrate the details of our approach. A floating lookback put provides a payoff of . at the lowest realized price while a floating strike lookback put allows the holder to sell at the highest realized price over the lookback period. Thus, they are called path-dependent exotic options as well. A lookback option is settled on the basis of either minimum … The payoff of the floating strike lookback put option is given by (7) f (S T, M 0 T) = M 0 T − S T = S T (e X T − 1) ≜ S T g (X T), where X t = ln M 0 t S t. 54. This study by contrast considers random sampling of lookback periods and compares resulting payoff of the call, put and spread options under floating and fixed strikes. One-Touch Options; A one-touch contract is a binary option with an American exercise style. Fixed lookback options have a specified strike price, while floating lookback options have a strike price determined by the asset path. https://breakingdownfinance.com/.../option-valuation/lookback-option-pricing • Since ST ≥ mT T0 and MT T0 ≥ ST so that the holder of a floating strike lookback option always exercise the option. lookback put option and obtains the partial di erential equation for the option. Pricing floating strike lookback put option under heston stochastic volatility 429 This paper is concerned with a pricing of the floating strike lookback put option. In this work, we exercise the homotopy analysis method Holders of puts have the strike fixed at the highest price during the life of the contract Section 3 applies the method of images and the Mellin transform to obtain a closed-form analytic solution for the lookback option. This observed price is applied as the strike price. In other words, the payoffs of a floating lookback call/put are, respectively, and. • Hence, the respective terminal payoff of the lookback call and put are given by ST− mT Floating Strike Lookback Options: The lookback call (put) option gives the holder the right to buy (sell) an asset at its lowest (highest) price observed during the life of the option. 54 american floating strike lookback put option on a. Floating lookback put 浮动回望看跌期权，到期收益： ，这使得投资者可以以合约有效期内的最高价格卖出资产； Fixed lookback call 固定回望看涨期权，到期收益： ； Fixed lookback call 固定回望看涨期权，到期收益： 。 八、Shout Options 呼叫期权 maximum value) S min (resp. Considering the floating interest rate and the uncertainty of the strike price, we derive the pricing formulas of lookback options including lookback call option and lookback put option. Furthermore, we give the numerical algorithms to illustrate our results and analyze the relationships between the price of lookback options and all the parameters. Details. Lookback option with floating strike As the name introduces it, the option's strike price is floating and determined at maturity. The price of floating strike lookback put option depends on the maximum or minimum of the underlying asset price. Fixed Lookbacks have the strike determined at purchase; Floating Lookbacks have the strike fixed at maturity. LookbackObj = fininstrument ( ___,Name,Value) sets optional properties using additional name-value pairs in addition to the required arguments in the previous syntax. Describe the payoff from a portfolio consisting of a floating lookback call and a floating lookback put with the same maturity. John decides to hold on to see if the underlying asset would drop further. School HKU; Course Title MATH 5010; Type. It is supposed by Cheuk and Vorst (1997) that for European floating strike lookback call option this formula is equal to (see formula <7>) S(t N)(1-u-k), where u=eσ√delt, N=nstep, k-the number of steps up. A floating lookback does not have a fixed price. Lookback options are traded on the basis of the underlier value, which is achieved throughout the life of the options. … The payout for a call option is essentially the asset price minus the minimum spot price observed during the life of the option. Then, he gives prices to the fixed options based on the relation of put-call parity and floating strike results. The payoffs of floating strike lookback options satisfy the above mentioned linear homogeneous property. Lookback option is a well-known path-dependent option where its payoff depends on the historical extremum prices. Strike determined at maturity and the lookback put option depends on the relation of put-call and. And obtains the partial di erential equation for the lookback call and the floating strike lookback put with the maturity. In addition, it supports American exercise for floating-strike lookback floating lookback put option have a fixed price path-dependent... 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