 Partial quanto lookback optionsHangsuck Lee, Hongjun Ha and Minha Lee The North American Journal of Economics and Finance, 2023, vol. 64, issue C Abstract: Financial instruments for hedging and speculating on the foreign exchange rate and equity risks draw the attention of market participants as financial transactions increase across multiple jurisdictions. Notably, a quanto lookback option has been actively traded because it successfully meets market demands. Although the quanto lookback option provides numerous benefits, a high premium due to the lookback feature is the primary culprit that hinders investors from purchasing it. This paper proposes partial quanto lookback options and provides the closed-form pricing formulas when the lookback feature is applied to the exchange rate or equity value, and the extremes are determined by observing them for a shorter period than the life of the option. Because pricing the options is challenging due to their partial path-dependence, we develop the quanto extreme expectation that facilitates deriving the option prices. Extensive numerical examples demonstrate the efficacy of the partial quanto lookback options in lowering the premiums. Keywords: Quanto lookback option; Partial monitoring; Quanto extreme expectation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:64:y:2023:i:c:s1062940822002066 DOI: 10.1016/j.najef.2022.101871 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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