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 f

Credit enhancement is a key part of the securitization transaction in structured finance, and is important for credit rating agencies. Credit enhancem

State the term- Financing Decision The second financial decision is financing decision,which essentially addresses two questions: a. How much capital must be raised to fu

All treasury securities are issued on the basis of auction. The auction process is computerized and hence qualified broker-dealers can access it electronically. T

Q. What is Purchasing Power Risk? Variations in the returns are caused also by the loss of purchasing power of currency. Inflation is the reason behind the loss of purchasing p

How are financing costs generally incorporated into the capital budgeting analysis process? Financing costs are typically captured in the discount or hurdle rate when doing IRR

caselets of bajaj electronics

Operating Leverage Operating leverage define the degree to which an organization cost of operation is fixed as opposed to variable. Therefore, it is a measure of how much a fir

Q. Traditional Approach of Financial Management? Traditional Approach: - Under this schema the role of financial management was limited to the procurement of funds on suitable

Role of Financial Intermediaries in the financial system: Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor