文章基本信息

标题：Moment-matching technique and General mean model in pricing Lookback option
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作者：Edouard Singirankabo ; Philip Ngare ; Carolyne Ogutu 等
期刊名称：Communications in Mathematical Finance
印刷版ISSN：2241-1968
电子版ISSN：2241-195X
出版年度：2019
卷号：8
期号：1
页码：123-145
语种：English
出版社：Scienpress Ltd
摘要：In option pricing one of the main problems to solve is how to de-termine the fair price of an option when no-arbitrage opportunity isconsidered. To solve this problem many models have been developedbut most of them there is no closed form solutions. In this paper, generalmean model is used to price Lookback option since it can entervene indetermination of minimum and maximum of underlying asset price un-der some conditions. The study shows the construction of lattice usingmoment-matching which provide a system of linear equations where realworld probabilities are unknown. To solve this system, Vandermondematrix is preferred as one of the easiest way to use. Since it is not al-lowed to price with real world probabilities and as this paper deals withincomplete market which has more than one martingale measure, it isneeded to choose the best one to use in pricing. Therefore, the relativeentropy method is introduced to find the minimum entropy martingalemeasure which is the neutral probability in other words. Finally, theresults from pricing Binomial floating lookback option is compared towell known Black-Scholes model.
关键词：Lookback option; Incomplete market; moment-matching; general mean; relative entropy martingale measure; Vandermonde matrix; Binomial model; Black-Scholes model