Federal ID: 91-6001537
ISSN: 0022-1090 (Print) | 1756-6916 (Online)
Journal of Financial and Quantitative Analysis
Vol. 34, No. 2, June 1999
Correction November 1999
Lookback Options under the CEV Process: A Correction
Phelim P. Boyle, Yisong “Sam” Tian, and Junichi Imai
Boyle and Tian (1999) developed a trinomial lattice method for valuing lookback options and barrier options under the CEV process. In the case of lookback options it turns out that this method produces values which are not quite accurate. In this note we discuss the source of the error and provide corrected numerical values. These revised values were obtained using the recently developed method of Davydov and Linetsky(1999). We also confirmed their results using Monte Carlo simulation. For both standard options and barrier options the Boyle-Tian lattice approach gives correct numerical values under the CEV assumption.