Alternative Pricing Methods for Shout Call Options

Shout call options are exotic options that give the investor the ability to 'shout' during the life of the option, thus locking in a profit and resetting the strike price to the prevailing spot price. We look at two approaches to value such options. The first approach makes use of canonical variables of the classical heat equation and results in a series solution. In the second approach an integral formulation is used, which can be more amenable to pricing when there is more than one 'shout' allowed.