[1] Hu Xiaoping, Cao Jie,. Pricing of discrete barrier options based on an analytical method [J]. Journal of Southeast University (English Edition), 2017, 33 (4): 511-516. [doi:10.3969/j.issn.1003-7985.2017.04.019]

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Pricing of discrete barrier options based on an analytical method()

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Journal of Southeast University (English Edition)[ISSN:1003-7985/CN:32-1325/N]

Volumn:

33

Issue:

2017 4

Page:

511-516

Research Field:

Economy and Management

Publishing date:

2017-12-30

Info

Title:

Pricing of discrete barrier options based on an analytical method

Author(s):

Hu Xiaoping¹;  Cao Jie²

¹School of Economics and Management, Southeast University, Nanjing 210096, China
²School of Mathematical Statistics, Nanjing University of Information Science and Technology, Nanjing 210044, China

Keywords:

discrete monitored;  barrier options;  pricing;  analytical method

PACS:

F830.59

DOI:

10.3969/j.issn.1003-7985.2017.04.019

Abstract:

The problem of analytically pricing the discrete monitored European barrier options is studied under the assumption of the Black-Scholes market. First, using variable transformation, the mean vector and covariance matrix of multi-dimensional marginal distribution are given. Secondly, the analytical pricing formulas of the discrete monitored up-knock-out European call option and the discrete monitored down-knock-out European put option are obtained by using the conditional probability and the characteristics of the multi-dimensional normal distribution. Finally, the effects of the discrete monitoring barriers on the prices of the barrier options are discussed and analyzed. The research results state that the price of the discrete monitored up-knock-out European call option increases with the increase in the up barrier, and the price of the discrete monitored down-knock-out European put option decreases with the increase in the down barrier.

References:

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Memo

Memo:

Biography: Hu Xiaoping(1971—), male, doctor, associate professor, hxpnj@seu.edu.cn.
Foundation items: The National Natural Science Foundation of China(No.71273139), the Soft Science Foundation of China(No.2010GXS5B147), the National Public Sector(Weather)Special Fund(No.GYHY201106019).
Citation: Hu Xiaoping, Cao Jie.Pricing of discrete barrier options based on an analytical method[J].Journal of Southeast University(English Edition), 2017, 33(4):511-516.DOI:10.3969/j.issn.1003-7985.2017.04.019.

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