Path-Dependent Option and Hedging

Path-Dependent Option

Whereas the value of a traditional option depends only on the price of the underlying on the day of exercise or expiration, the value of a path-dependent option depends partly or exclusively on the price pattern the underlying follows in reaching exercise or expiration. Asian (average price or rate) options, look- back options, and barrier options are all examples of path-dependent options. If early exercise could be appropriate for an American option under certain circumstances, that option is also path dependent in a sense. See Average Price or Rate Option (APO, ARO) (diagrams), Exploding Option, In Option, Lookback Option, Out Option, Reset Option or Warrant (diagram).

介绍hedging的PPT

http://www.math.nyu.edu/research/carrp/lectures/hedging/sld001.htm