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European Symposium on Algorithms

ESA 2007: Algorithms – ESA 2007 pp 275–286Cite as

Optimal Algorithms for k-Search with Application in Option Pricing

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Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 4698))

Abstract

the k-search problem, a player is searching for the k highest (respectively, lowest) prices in a sequence, which is revealed to her sequentially. At each quotation, the player has to decide immediately whether to accept the price or not. Using the competitive ratio as a performance measure, we give optimal deterministic and randomized algorithms for both the maximization and minimization problems, and discover that the problems behave substantially different in the worst-case. As an application of our results, we use these algorithms to price “lookback options”, a particular class of financial derivatives. We derive bounds for the price of these securities under a no-arbitrage assumption, and compare this to classical option pricing.

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Author information

Authors and Affiliations

  1. Institute of Theoretical Computer Science, ETH Zurich, 8092 Zurich, Switzerland

    Julian Lorenz, Konstantinos Panagiotou & Angelika Steger

Authors
  1. Julian Lorenz
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  2. Konstantinos Panagiotou
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  3. Angelika Steger
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Editor information

Lars Arge Michael Hoffmann Emo Welzl

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© 2007 Springer-Verlag Berlin Heidelberg

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Lorenz, J., Panagiotou, K., Steger, A. (2007). Optimal Algorithms for k-Search with Application in Option Pricing. In: Arge, L., Hoffmann, M., Welzl, E. (eds) Algorithms – ESA 2007. ESA 2007. Lecture Notes in Computer Science, vol 4698. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-75520-3_26

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  • DOI: https://doi.org/10.1007/978-3-540-75520-3_26

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-75519-7

  • Online ISBN: 978-3-540-75520-3

  • eBook Packages: Computer ScienceComputer Science (R0)

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