Unlocking Investment Potential: Lookback Options Reduce Risks and Solve Market Timing
The study analyzed the benefits of lookback options, which allow investors to reduce risks by looking back at the option period. Using Facebook stock as an example, the researchers found that changing the strike price affects fixed lookback options more than floating lookback options. Changes in spot price and volatility also impact lookback options differently compared to European options. Despite having a higher price, lookback options help solve market timing issues, making them a good investment choice.