Resource title

On an Alternative Approach to Pricing General Barrier Options

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Resource description

In this paper, an alternative approach to pricing barrier options is presented that relies on the use of the first hitting time density to the barrier. The lateral Chapman-Kolmogorov relation is used as a major tool in order to determine option prices. It turns out that this approach allows for pricing barrier options with more general payoffs and with general continuous Markovian stochastic processes as underlying (at least numerically). As an illustrative example, a simple down-and-in call option is considered and its well-known closed form pricing formula is obtained.

Resource author

Michael Suchanecki

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22904

Resource license

Adapt according to the presented license agreement and reference the original author.