| Abstract: | We present a straightforward and computationally efficient binomial approximation scheme for the valuation of lookback options. This enables us to value American lookback options. Previous research on lookback options has assumed that the contracts are based on the extrema of the continuously observed price of the underlying security; in practice, however, contracts are often based on the extrema of prices sampled at a finite set of fixed dates. We adapt our binomial scheme to investigate the impact on the value of the options. |
