Author(s)

Yongting Chen, Yufei Wang and Yang Wu

Corresponding Author

Yongting Chen

ABSTRACT

Among all the options of Amazon, Lookback options have lower risk compared with European options and relative higher return if under the same risk. Therefore, we investigated the Lookback option pricing for Amazon, to discuss the suitability of Lookback options for Amazon stocks. Based on Black-Scholes pricing model and Monte-Carlo simulations as well as data collected from Yahoo finance, the payoff of Lookback options and the sensitivity are demonstrated, respectively. According to the analysis, when the market volatility is high, the payoff of lookback options is higher than European options, while the profit may not higher than European options since the premium of lookback options are higher. There results shed light on the investment for Amazon Lookback options.

KEYWORDS

Lookback options, Amazon, Black-Scholes model, Monte-Carlo simulations