I'm working on the following problem and would appreciate some input because I'm stuck.
Consider a fund that works as follows. The fund starts with $S_0$ worth of assets following a Geometric Brownian Motion. At each time of the schedule $\{t_i\}_{1 \leq i \leq N}$, party $B$ gets a payment worth $\alpha S_{t_i}$. This goes on for $N$ dates, then a party $A$ fills the fund back to $S_0$ if $S_{t_N} < S_0$. If $S_{t_N} > S_0$ the difference is paid to party $C$.
Now I need to value the claims of all three parties. At maturity the claim of $C$ is worth $\max(S_{t_N}-S_0, 0)$, while the claim of $A$ is worth $\min(S_{t_N} - S_0, 0)$. Now let $Q$ be the risk-neutral measure. I thought the initial value of these claims to be $e^{-rt_N}E^Q(\max(S_{t_N}-S_0, 0))$ and $e^{-rt_N}E^Q(\min(S_{t_N}-S_0, 0))$ respectively. I approximated this expectation by simulating under $Q$ (so simulate $S_{t_i}$ under $Q$ with drift term $r$, where $r$ is the risk free rate). However at each period I reset as follows: $$S_{t_i^+} = (1-\alpha)S_{t_i^-}$$ where: $$S_{t_i^-}=S_{t_{i-1}^+}e^{(r-\frac{\sigma^2}{2})(t_i-t_{i-1})+\sigma W_{t_i-t_{i-1}}}$$ 1) Can I still use this pricing method? Doesn't taking a cut of $S_{t_i}$ every period ruin it?
2) The second question I have is what is the claim of $B$ and how to price it? My intuition: After $N$ periods $B$ has received $\sum_i \alpha S_{t_i}$. But how to price this?
3) And lastly: there is supposed to be a parity relationship between the values of the three claims. The fund transforms $S_0$ and the contribution of $A$ into payments to $B$ and $C$ and $S_0$. So I thought, somehow the price of the claim of $A$ should be equal to the prices of $B$ and $C$. Is this correct? If so why? If not what should I do?