American options with lookback payoff

Min Dai, Yue Kuen Kwok

Research output: Journal article publicationJournal articleAcademic researchpeer-review

23 Citations (Scopus)

Abstract

We examine the early exercise policies and pricing behaviors of one-asset American options with lookback payoff structures. The classes of option models considered include floating strike lookback options, Russian options, fixed strike lookback options, and the pricing model of the dynamic protection fund. For each class of the American lookback options, we analyze the optimal stopping region, in particular the asymptotic behavior at times close to expiration and at infinite time to expiration. The interrelations between the price functions of these American lookback options are explored. The mathematical technique of analyzing the exercise boundary curves of lookback options at infinitesimally small asset values is also applied to the American two-asset minimum put option model.

Original languageEnglish
Pages (from-to)206-227
Number of pages22
JournalSIAM Journal on Applied Mathematics
Volume66
Issue number1
DOIs
Publication statusPublished - Oct 2005

Keywords

  • American feature
  • Free boundary problems
  • Lookback options
  • Two-asset minimum put option

ASJC Scopus subject areas

  • Applied Mathematics

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