Path Dependent Option

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Path Dependent Option

An option contract whose price is determined according to some formula involving the price of the underlying asset over time. Most options have prices that are dependent upon the value of the underlying asset at the time the option is exercised. A path dependent option, on the other hand, uses a more complex formula. For example, in some Asian options, the strike price is the average of the prices of the underlying asset over the life of the contract.
References in periodicals archive ?
Kou, 1999, "Connecting Discrete and Continuous Path-Dependent Options," Finance and Stochastics, 3, 55-82.
Yamamoto, 2005, "A Double-exponential Fast Gauss Transform Algorithm for Pricing Discrete Path-dependent Options," Operations Research, vol.
Their model is general enough to deal with any complex final payoff generated by European path-dependent options.
Specifically, the Quanto Asian Put belongs to the class of the path-dependent options.
The augmented state variable approach for pricing strongly path-dependent options using either partial differential equations or Monte Carlo simulation
Chapter 15 looks at advanced derivative designs and strategies including portfolio insurance, customized products, and exotic options such as binary and path-dependent options.
Pricing Path-Dependent Options in a Backward Algorithm