Abstract
Lookback N-time period performance options are proposed. Explicit risk-neutral probability density functions for extrema of N-time period return rates are obtained over the time interval [0, T ], T ≤⃒ 2N. Pricing formulae at t = 0 for lookback performance options with logarithm return rate are derived. The pricing formulae for lookback performance options with gross return rate at t = 0 can be derived similarly. Put-call parity relations at t = 0 for these options follow from these pricing formulae. Applications of lookback performance options are also discussed.
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