Continuity Correction for Barrier Options in Jump-Diffusion Models
نویسندگان
چکیده
منابع مشابه
A matched asymptotic expansions approach to continuity corrections for discretely sampled options. Part 1: barrier options
We discuss the ‘continuity correction’ that should be applied to relate the prices of discretely sampled barrier options and their continuouslysampled equivalents. Using a matched asymptotic expansions approach we show that the correction of Broadie, Glasserman & Kou (Mathematical Finance 7, 325 (1997)) can be applied in a very wide variety of cases. We calculate the correction to higher order ...
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In this survey we shall focus on the following issues related to jump-diffusion models for asset pricing in financial engineering. (1) The controversy over tailweight of distributions. (2) Identifying a risk-neutral pricing measure by using the rational expectations equilibrium. (3) Using Laplace transforms to pricing options, including European call/put options, path-dependent options, such as...
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The payoff of a barrier option depends on whether or not a specified asset price, index, or rate reaches a specified level during the life of the option. Most models for pricing barrier options assume continuous monitoring of the barrier; under this assumption, the option can often be priced in closed form. Many (if not most) real contracts with barrier provisions specify discrete monitoring in...
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عنوان ژورنال:
- SIAM J. Financial Math.
دوره 2 شماره
صفحات -
تاریخ انتشار 2011