The rapid development of new generations of risk-management products reflects a logical market response to a number of factors, the central issue among them being volatility. In this paper we focus on the pricing of the lookback spread option and the joint quanto lookback spread option. The lookback spread options try to capture price volatility. We find an analytical formula for the lookback spread option and use the techniques developed to price the joint quanto lookback spread option. We observe that when the option is in-the-money at the current time the analytical price can be obtained. If the lookback spread option is out-of-the-money at the current time we resort to the Forward Shooting Grid method to evaluate the option price.
Permanent URL for this record: https://lbezone.hkust.edu.hk/bib/b688785
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