Valuation of lookback option under uncertain volatility model

Weiwei Wang and Dan A. Ralescu

Chaos, Solitons & Fractals, 2021, vol. 153, issue P1

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.

Keywords: Uncertainty theory; Uncertain volatility model; Lookback option; Parameter estimation (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:153:y:2021:i:p1:s0960077921009206

DOI: 10.1016/j.chaos.2021.111566

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