This option is a path dependent option
whose final payoff depends on the paths of its underlying asset.
Turbo warrants are barrier options with the rebate whose value is computed by another path dependent option
. They can be very sensitive to the change in volatility under stochastic volatility models as pointed out by , which is contrary to the case of the Black-Scholes model.
Viswanathan, "Path dependent options
, the case of lookback options," The Journal of Finance, vol.
Twelve chapters are: preliminaries of VBA; basic properties of futures and options; introduction to simulation; Brownian motions and ItoAEs rule; black-Scholes model and option pricing; generating random variables; standard simulations in risk management; variance reduction techniques; path dependent options
; multiasset options; interest rate models; Markov Chain Monte Carlo methods.
Viswanathan, 1991 , "Path Dependent Options
: the Case of Lookback Options," Journal of Finance, XLVI, 5, 1893-1907.
Tschoegl, 1985, "On Inferring Standard Deviations from Path Dependent Options
", Economics Letters, 18:377-380