Double Lookbacks

Hua He, William P. Keirstead and Joachim Rebholz

Mathematical Finance, 1998, vol. 8, issue 3, 201-228

Abstract: A new class of options, double lookbacks, where the payoffs depend on the maximum and/or minimum prices of one or two traded assets is introduced and analyzed. This class of double lookbacks includes calls and puts with the underlying being the difference between the maximum and minimum prices of one asset over a certain period, and calls or puts with the underlying being the difference between the maximum prices of two correlated assets over a certain period. Analytical expressions of the joint probability distribution of the maximum and minimum values of two correlated geometric Brownian motions are derived and used in the valuation of double lookbacks. Numerical results are shown, and prices of double lookbacks are compared to those of standard lookbacks on a single asset.

Date: 1998
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https://doi.org/10.1111/1467-9965.00053

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Working Paper: Double Lookbacks (1995)
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