Fixed Lookback Option Pricing Based on Black-Scholes Model and Monte-Carlo Simulation

Yu Cao; Xinlun Ma

Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China

Research Article

Fixed Lookback Option Pricing Based on Black-Scholes Model and Monte-Carlo Simulation

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@INPROCEEDINGS{10.4108/eai.28-10-2022.2328424,
    author={Yu  Cao and Xinlun  Ma},
    title={Fixed Lookback Option Pricing Based on Black-Scholes Model and Monte-Carlo Simulation},
    proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China},
    publisher={EAI},
    proceedings_a={FFIT},
    year={2023},
    month={4},
    keywords={b-s model; look back option; valuation; monte-carlo simulation},
    doi={10.4108/eai.28-10-2022.2328424}
}

Yu Cao
Xinlun Ma
Year: 2023
Fixed Lookback Option Pricing Based on Black-Scholes Model and Monte-Carlo Simulation
FFIT
EAI
DOI: 10.4108/eai.28-10-2022.2328424

Yu Cao¹^,*, Xinlun Ma²

1: Zhejiang University
2: South-Central University of Nationalities

*Contact email: 3190105924@zju.edu.cn

Abstract

This paper investigates the fixed lookback option pricing based on B-S model and Monte-Carlo simulation and tries to demonstrate the comparative advantage of fixed lookback options over plain vanilla ones. In order to achieve the goals, we give out the methodology that is used and the three scenarios which can prove the advantage of fixed lookback option. Besides, the Sensitivity analysis is applied to evaluate the effects of various variables on the option price. Overall, these results shed light on guiding further research focusing on option pricing.

Keywords: b-s model; look back option; valuation; monte-carlo simulation

Published: 2023-04-14
Publisher: EAI

: http://dx.doi.org/10.4108/eai.28-10-2022.2328424