For the lookback put: a. What is the value of a lookback put if St = 0?

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For the lookback put:
a. What is the value of a lookback put if St = 0? Verify that the formula gives you the same answer.
b. Verify that at maturity the value of the put is ST ˆ’ ST.
A European lookback call at maturity pays ST ˆ’ ST. A European lookback put at maturity pays ST ˆ’ ST. (Recall that ST and ST are the maximum and minimum prices over the life of the option.) Here is a formula that can be used to value both options:
For the lookback put:a. What is the value of a

Where

For the lookback put:a. What is the value of a

The value of a lookback call is obtained by setting St = St and ω = 1. The value of a lookback put is obtained by setting ËœSt = St and ω = ˆ’1.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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