The valuation of discretely sampled European lookback options: a DG approach

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F46747885%3A24510%2F17%3A00006305" target="_blank" >RIV/46747885:24510/17:00006305 - isvavai.cz</a>
Alternative codes found
RIV/61989100:27510/17:10240853
Result on the web
<a href="http://fim2.uhk.cz/mme/index.php?page=conferenceproceedings" target="_blank" >http://fim2.uhk.cz/mme/index.php?page=conferenceproceedings</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
The valuation of discretely sampled European lookback options: a DG approach
Original language description
Path-dependent options represent an important part of the derivatives traded in financial markets. One of the commonly used and popular subclasses of path-dependent options is formed by so-called lookback options with payoff depending on the minimum or maximum price of the underlying asset attained during the lifetime of the option and enabling the investors to sell at the highest or buy at the lowest price, i.e., the most favourable one. Commonly, the maximum or minimum are monitored at discrete dates so that there is no analytical pricing formulae and one has to rely on numerical techniques. In this paper we present a PDE approach to European lookback options leading to the usual Black-Scholes equation, where the path-dependent variable appears as a parameter only and discrete sampling is balanced by introducing the jump conditions across the sampling dates. Since the pricing equation is the same as for the plain vanilla option, the discontinuous Galerkin (DG) method is applied to the problem in the same manner, except for the treatment of jump conditions at each monitoring date. Finally, reference numerical experiments illustrate empirical findings.
Czech name
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Czech description
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Project
<a href="/en/project/GA16-09541S" target="_blank" >GA16-09541S: Robust numerical schemes for pricing of selected options under various market conditions</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
35TH INTERNATIONAL CONFERENCE MATHEMATICAL METHODS IN ECONOMICS (MME 2017)
ISBN
978-80-7435-678-0
ISSN
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e-ISSN
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Number of pages
6
Pages from-to
242-247
Publisher name
Univerzita Hradec Králové
Place of publication
Hradec Králové
Event location
Hradec Králové
Event date
Jan 1, 2017
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
000427151400042

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