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The Price of a lookback option as the solution of a boundary-value problem for the heat equation

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A lookback option is priced by solving the third boundary-value problem for the heat equation. The application of the Laplace transform makes it possible to represent the option price as a certain integral expressible in terms of the distribution of the first arrival time of a Brownian motion at a given level.

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Authors and Affiliations

  1. Faculty of Computational Mathematics and Cybernetics, Moscow State University, Moscow, Russia

    V. V. Morozov & D. L. Muravei

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  1. V. V. Morozov
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  2. D. L. Muravei
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Correspondence to V. V. Morozov.

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Translated from Prikladnaya Matematika i Informatika, No. 28, pp. 66 – 72, 2008.

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Morozov, V.V., Muravei, D.L. The Price of a lookback option as the solution of a boundary-value problem for the heat equation. Comput Math Model 20, 65–70 (2009). https://doi.org/10.1007/s10598-009-9020-7

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  • DOI: https://doi.org/10.1007/s10598-009-9020-7

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