LOEX Option: A Combination of Exchange Option and Lookback Option

Authors

  • Rajabali Ghasem Pour Department of Mathematics and Physics, University of Campania Luigi Vanvitelli, Caserta, Italy
  • S. Pourmohammad Azizi Department of Mathematics and Computer Sciences, Allameh Tabataba’i University, Tehran, Iran
  • Sajad Ahmad Waloo Department of Electrical Engineering, National Taiwan Ocean University, Keelung, Taiwan

Keywords:

Exchange option, Lookback option, Black–Scholes Option pricing, Mesh-free method

Abstract

In this article, we consider modeling and pricing a combination of two options (Exchange option and Lookback option) that we call the LOEX option. It is a type of exotic option, or clearer, path-dependent option because its price depends on the maximum and minimum prices of the assets to be considered. In reality, we introduce a conditional claim on two assets: the holder can change the first asset with the highest price to the second with the lowest price or cancel the transaction at the strike time. In this paper, after describing and modeling this option, we use numerical methods to estimate the pricing using the MATLAB software and present the results.

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Published

2024-01-12

Issue

Vol. 1 No. 1 (2024): Management Analytics and Social Insights

Section

Articles

Categories

How to Cite

LOEX Option: A Combination of Exchange Option and Lookback Option. (2024). Management Analytics and Social Insights, 1(1), 50-58. https://masi-journal.com/journal/article/view/22