• Communications for Statistical Applications and Methods
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• 제11권2호
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• pp.213-225
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• 2004

A fixed-strike lookback option is an option whose payoff is determined by the maximum (or minimum) price of the underlying asset within the option's life. Under the Black-Scholes framework, the time-t price of an equity asset follows a geometric Brownian motion. Applying the method of Esscher transforms, this paper will derive explicit pricing formulas for fixed-strike lookback call and put options, respectively. In addition, this paper will show a relationship (duality property) between the pricing formulas of the call and put options. Finally, this paper will derive explicit pricing formulas for the fixed-strike lookback options when their underlying asset pays dividends continuously at a rate proportional to its price.