Pricing Lookback Options with Discrete Dividend Payment
Lookback options are path dependent options and have been used widely.The pricing of lookback options under the condition that the underlying asset price falls by the same amount as dividend at payment dates and follows log-normal distribution between payment dates is studied.The approximate analytical pric-ing formulas for lookback options are derived using second-order moment matching.Numerical experiments show that the option prices calculated by the approximate formulas are basically consistent with those by Monte Carlo simulation.
discrete-dividendlookback optionsmoment matchingMonte Carlo simulation