CIRJE-F-596. Yamamoto, Kyo, Seisho Sato, and Akihiko Takahashi, "Probability Distribution and Option Pricing for Drawdown in a Stochastic Volatility Environment", October 2008.

This paper studies the probability distribution and option pricing for drawdown in a stochastic volatility environment. We derive an analytical approximation formula for them by applying a singular perturbation method ([12]). Then, numerical examples show that the instantaneous correlation between the asset value and the volatility state crucially affects the probability distribution and option prices for drawdown.