"A Semi-group Expansion for Pricing Barrier Options"

This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial differential equations (PDEs) arising in barrier option pricing. As an application, we propose a concrete approximation formula under a stochastic volatility model and demonstrate its validity by some numerical experiments.

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Year of publication:	2012-02
Authors:	Kato, Takashi ; Takahashi, Akihiko ; Yamada, Toshihiro
Institutions:	Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics

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Extent:	application/pdf
Series:	CIRJE F-Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number CIRJE-F-841 26 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009492702