Pricing double barrier options using reflection principle

This service is more advanced with JavaScript available, learn more at http: Soft Computing as Transdisciplinary Science and Technology pp Double barrier options are important path-dependent derivatives in the financial market.

How to price them efficiently and accurately is thus important. Until now, no simple closed-form pricing formula for double barrier options is reported.

Double barrier options can be priced on a lattice that divides a certain time interval from option initial date to maturity date into n equal-length time steps. To obtain an accurate pricing result without suffering from price oscillation, n is required to be a large number.

Unfortunately, the lattice pricing algorithm runs in O n 2 time. This paper proposes a linear-time combinatorial algorithm that can generate the same pricing results as the lattice algorithm. This algorithm uses a novel technique based on the reflection principle and the inclusion-exclusion principle. Numerical experiments are given to verify the excellent performance of our algorithm. Unable to display preview. Part of Springer Nature.

Pricing Double Barrier Options by Combinatorial Approaches | SpringerLink

Not logged in Not affiliated Pricing Double Barrier Options by Combinatorial Approaches. Cite this paper as: Advances in Soft Computing, vol The author was supported in part by NSC grant E Bhagavatula RS, and Carr PP Valuing Double Barrier Options with Fourier Series.

Manuscript, New York University, NY, USA. Cox J, Ross S, Rubinstein M Option Pricing: CrossRef MATH Google Scholar. Figlewski S, Gao B The Adaptive Mesh Model: A New Approach to Efficient Option Pricing.

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Geman H, and Yor M Pricing and Hedging Double-Barrier Options: MATH CrossRef Google Scholar. Lyuu YD Very Fast Algorithms for Barrier Option Pricing and the Ballot Problem.

Ritchken P On Pricing Barrier Options. Wei, JZ Valuation of Discrete Barrier Options by Interpolations.

Department of Applied Mathematics Chung-Yuan Christian University Tao-Yuan county Taiwan 2. Publisher Name Springer, Berlin, Heidelberg Print ISBN Online ISBN eBook Packages Engineering About this book Reprints and Permissions. Source Sans Pro, Helvetica, Arial, sans-serif; font-size: Instant download Readable on all devices Own it forever Local sales tax included if applicable.

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