Window quanto lookback options

초록

This paper introduces window quanto lookback options, a new class of exotic derivatives whose payoffs depend on the extreme of foreign equity prices or exchange rates observed over a fixed subinterval, called the window, within the life of the option. By adjusting the window, investors can manage risk and implement speculative strategies. We derive an expectation formula capturing the joint distribution of windowed extremes and terminal values under a two-dimensional Brownian motion framework. Based on this, we develop semi-analytic pricing formulas for cases where the lookback feature applies to either the foreign equity or the exchange rate. Numerical results show premium behaviors across market conditions.

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