A path-dependent option that is a theoretical (as yet) extension of a lookback option. The option’s payoff is based on a lookback period within which the underlying price/rate spends a portion of its time during the option life. This is in contrast with a standard lookback option whose payoff is conditional on the underlying spending some time within a specified level as agreed in the contract. This option is a relatively new breed of exotic options, and it has not appeared, as yet, on trading floors. The logic behind the quantile option (or also the alpha-quantile option) is to provide a payoff which is similar in magnitude to that of a standard lookback option (an equivalent fixed-strike lookback option), but at a fraction of the cost.
Derivatives
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