A Technical Note, Looback Options: a comparison between Monte Carlo Techniques

Authors

  • Marcelo González A. Universidad de Chile
  • Antonio Parisi F. Universidad de Chile
  • Arturo Rodríguez P. Universidad de Chile

Abstract

Looback options are path dependent contingent claims whose payoffs depend on the extrema of the underlying asset price over a certain time interval. In this note we compare the performance of two Monte Carlo techniques to price lookback options, a crude Monte Carlo estimator and Antithetic variate estimator. We find that the Antithetic estimator performs better under a variety of performance measures.

Keywords:

Monte Carlo, Simulations, Options