Lookback options, Financial Management

Can you describe what the payoffs from lookback options depend on? Can you write in a concise notation the payoff of a floating lookback call?

a. What is the payoff of a portfolio with a long position in a floating lookback call and with a short position in a floating lookback call with the same maturity on the same underlying asset?

b. Consider a newly written floating lookback put on a non-dividend paying-stock where the stock price is 50, the stock price volatility is 40% per annum, the risk-free rate is 10% per annum (CONT), and the time to maturity is 3 months. Calculate the value of the put.

c. Does any type of put-call parity hold for lookback option? If so, write this relation and explain the different components.

d. Does a floating lookback call become more valuable or less valuable as we increase the frequency with which we observe the asset price in calculating the minimum?

 

Posted Date: 2/23/2013 4:56:56 AM | Location : United States







Related Discussions:- Lookback options, Assignment Help, Ask Question on Lookback options, Get Answer, Expert's Help, Lookback options Discussions

Write discussion on Lookback options
Your posts are moderated
Related Questions
What are the pros and cons of commercial paper relative to bank loans for a company seeking short-term financing? Commercial paper is generally a cheaper source of short-term fin

What is risk aversion? If common stockholders are risk averse, how do you explain the fact that they often invest in very risky companies? Risk aversion is the tendency to evad

Analytical way of viewing financial problems of a firm The new approach is an analytical way of viewing financial problems of a firm. The main contents of this tactic are what

Explain the Post-acquisition integration plan Post-acquisition integration plan Keep  all  channels  of communications open,  by  includin

Suggestion Regarding Credit Limit Should It Be Approved Or Not What Should Be The Ammount Of Credit Limit That Electronics Give To Booth Plastics

Hedge Funds: Hedge Funds are investment partnerships that strive for above average returns through active portfolio management and whose primary compensation is a percentage of

Air Manchester (AM) is a new airplane manufacturer. It is considering investing in a software package, e.g. SAS, which would make its daily operations more efficient

Q. Show the Accounting Profit Criteria? Accounting Profit Criteria: - Under accounting profit criteria there is merely one method for making capital expenditure decisions. This

What makes the APV capital budgeting framework helpful for analyzing foreign capital expenditures? The APV framework is a value- additivity method. As international projects fr

On Completion of her introductory finance course, Kieran was so pleased with the amount of useful and interesting knowledge she gained that she convinced her parents, who were weal