Static hedging methods for pricing double barrier options

Yi-Ling Chen, Hong-Yu Luo, Wei-Che Tsai, and Hang Zhang

This research applies a static hedging portfolio method derived from Derman, Ergener, and Kani (1995) (henceforth Derman's SHP method) and a new SHP method with European cash-or-nothing binary options developed by Chung, Shih, and Tsai (2013) to price European continuous double barrier (ECDB) options and the rebates of the ECDB options. Our numerical results indicate that the new SHP method outperforms Derman's SHP method in terms of efficiency and effectiveness under all circumstances.

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Year of publication:	2022
Authors:	Chen, Yi-Ling ; Luo, Hong-Yu ; Tsai, Wei-Che ; Zhang, Hang
Published in:	Advances in Pacific Basin business, economics and finance. - Bingley : Emerald, ISSN 2514-4669, ZDB-ID 2931955-9. - Vol. 10.2022, p. 29-58
Subject:	hedgingefficiency \| Static hedging \| double barrier options \| binary options \| option pricing \| exotic options \| Optionsgeschäft \| Option trading \| Hedging \| Optionspreistheorie \| Option pricing theory \| Black-Scholes-Modell \| Black-Scholes model \| Derivat \| Derivative

Type of publication:	Article
Type of publication (narrower categories):	Aufsatz in Zeitschrift ; Article in journal
Language:	English
Other identifiers:	10.1108/S2514-465020220000010002 [DOI]
Source:	ECONIS - Online Catalogue of the ZBW

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