Comparison of binomial tree methods for pricing lookback option
- 주제(키워드) Comparison of binomial tree methods for pricing lookback option
- 발행기관 고려대학교 대학원
- 지도교수 김준석
- 발행년도 2011
- 학위수여년월 2011. 8
- 학위구분 석사
- 학과 일반대학원 금융공학협동과정
- 원문페이지 31 p
- 실제URI http://www.dcollection.net/handler/korea/000000026331
- 본문언어 영어
- 제출원본 000045668436
초록/요약
Lookback options are path dependent options. Tree method is efficient method to price the path dependent type. Lookback options are dependent on the extrema of a given security’s price over a certain period of time so it takes long time to price. Therefore we need to find more accurate and faster method. In this article, we will explain lookback option, and briefly review many binomial tree models. Also we will compare four kinds of trees to test accuracy by root mean square(RMS) error. We can conclude that, in case of European floating lookback call option, the fastest method is Adjusted tree, but the most accurate tree is Tian tree. In accuracy test, we fixed accuracy around 0.95 and compare each tree method.
more목차
Contents
1 Introduction 2
2 De nition of Lookback option 3
3 Problem of Lookback option pricing 5
4 Binomial tree methods 6
4.1 Cox-Ross-Rubinstein . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Tian tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Jarrow-Rudd(JR)tree . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Jarrow-Rudd risk-neutral tree(JRRN) . . . . . . . . . . . . . 8
4.5 Adjusted tree . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5 Lookback option model 9
5.1 European call floating lookback option . . . . . . . . . . . . . 9
5.1.1 CRR model . . . . . . . . . . . . . . . . . . . . . . . 9
5.1.2 Jarrow-Rudd(JR) model . . . . . . . . . . . . . . . . . 13
5.1.3 Tian model . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1.4 Adjusted tree model . . . . . . . . . . . . . . . . . . . 20
6 Numerical Result 25
6.1 European call lookback floating option . . . . . . . . . . . . . 25
7 Conclusions 26
