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Valuation of lookback option under uncertain volatility model

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  • Wang, Weiwei
  • Ralescu, Dan A.

Abstract

Lookback option is an exotic option whose payoff depends on the maximum or minimum price of underlying asset within the period of validity. This paper mainly studies the valuation of lookback option under an uncertain volatility model. The pricing formulas of lookback option are derived and some algorithms are given to calculate the option prices numerically. Finally, we apply the minimum cover estimation approach to compute the parameters of the uncertain volatility process and the corresponding numerical example is provided to illustrate the method.

Suggested Citation

  • Wang, Weiwei & Ralescu, Dan A., 2021. "Valuation of lookback option under uncertain volatility model," Chaos, Solitons & Fractals, Elsevier, vol. 153(P1).
    • Handle: RePEc:eee:chsofr:v:153:y:2021:i:p1:s0960077921009206
    DOI: 10.1016/j.chaos.2021.111566
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    References listed on IDEAS

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    Cited by:

    1. Frank Ranganai Matenda & Justin Chirima & Mabutho Sibanda, 2023. "Valuation of Corporate Debt and Equity in Uncertain Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 7-12, January.

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