How Likely is it to Hit a Barrier? Thoretical andEmperical Estimates

We study probabilities which determine the payo of barrier options:the probability that an asset hits a barrier before maturity, theprobability that the asset is below the barrier at maturity, and theratio of both probabilities. The correct estimation of these probabilitieshas crucial eects on the valuation of barrier options and relatedstructured products.[...]

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Year of publication:	2009-10-24
Authors:	Su, Lujing ; Rieger, Marc Oliver
Institutions:	Institut für Schweizerisches Bankwesen <Zürich>
Subject:	Option \| GARCH-Prozess \| Produkt \| Struktur \| ARMA-Modell

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1 Introduction
2 First theoretical estimates
2.1 Bachelier model
2.2 Black-Scholes model
3 Empirical estimation and the \large quotientpuzzle"
3.1 Methods
3.2 Data
3.3 Empirical measurements of historical barrier quotients
4 How to solve the puzzle?
5 Barrier probabilities as a model benchmark
5.1 Historical probability as a benchmark
5.2 Independent probability as benchmark
6 Conclusions
Acknowledgements
References

Persistent link: https://www.econbiz.de/10005868527