Suppose the terminal payoff function of the partial lookback call and put options are max(S_T − λm^T_T0 , 0), λ > 1 and max (λM^T_T0 − S_T , 0) , 0

where d_m and d_M are given by (4.2.9) and (4.2.10), respectively.

Transcribed Image Text:

In = SN (dm - A)-. - Ame="N (dm - 1/-√7) -ONE) T c(S, m, t) = SN dm S -2r/0² 2r +e-rt -* — AS [ (²) ²* * N (_dm + ² - o - In -0 2r m Ơ - ert2r/o² N-dm p (S, M, t) = -SN-dM+ + Met N - - Ina O√t, In a ³N ( - du + 1 //2 + OVE) OVE In a I) S -2r/0² 2r Ina 1² - AS [ (1) 2010* N ( dm - ² √T + INA) -S NdM 2r - 2²² 2²20/10²³ N (dm + In ^^ )]. ert2r/0² 0.