Pricing of Fixed-Strike Lookback Options on Assets with Default Risk

Table 1

Change in the relative errors for the Monte-Carlo simulation and the numerical solution by Finite Difference Method (FDM) against closed-form solution of VFSLCO with respect to the number of simulations. Here, the relative error 1 is given by and the relative error 2 is expressed by . The parameter values are given by , , , , , , , , , , and .

No. of Sim.	Monte-Carlo Simulation	Closed-form Solution	Numerical Solution by FDM	Relative error 1	Relative error 2
10000	15.4915	16.08468	16.1701	0.0368	0.0053
20000	15.7183	16.08468	16.1701	0.0227	0.0053
50000	15.8312	16.08468	16.1701	0.0157	0.0053
100000	15.9428	16.08468	16.1701	0.0088	0.0053