The terminal payoff of the lookback spread option is given by Show that the price of the

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The terminal payoff of the lookback spread option is given by

T Csp (S, m, M,0) = max(MT - m - X, 0).

Show that the price of the European lookback spread option can be expressed as (Wong and Kwok, 2003)

(i) currently at- or in-the-money, that is, M − m − X ≥ 0

Csp (S, m, M, T) = Cfe(S, m, t) + Pfe(S, M, t) - Xe";

(ii) currently out-of-the-money, that is, M − m − X

Csp (S, m, M, t) = cfe (S, m, t) + Pfe(S, M, t) - Xet cm+X P(M <

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Mathematical Models Of Financial Derivative

ISBN: 9783642447938

2nd Edition

Authors: Yue-Kuen Kwok

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Question Posted: Jan 05, 2024 10:45 AM

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The terminal payoff of the lookback spread option is given by Show that the price of the

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