PT  - JOURNAL ARTICLE
AU  - Seungmook Choi
AU  - Mel Jameson
TI  - Lookback Option Valuation
AID  - 10.3905/jod.2003.319216
DP  - 2003 Nov 30
TA  - The Journal of Derivatives
PG  - 53--64
VI  - 11
IP  - 2
4099  - https://pm-research.com/content/11/2/53.short
4100  - https://pm-research.com/content/11/2/53.full
AB  - The binomial model is a simple and straightforward way to price simple and straightforward options, like plain vanilla calls and puts, even with American exercise. But path-dependent contracts, such as lookback options, present problems for the binomial because of the need to keep track of a path statistic, in this case, the highest or lowest price attained, along each path through the lattice. Choi and Jameson present a very clever technique for stepping backward through the tree much more efficiently, so that one can value a lookback without carrying an auxiliary variable.