Abstract
In this paper we address the pricing of double barrier options. To derive the density function of the first-hit times of the barriers, we analytically invert the Laplace transform by contour integration. With these barrier densities, we derive pricing formulæ for new types of barrier options: knock-out barrier options which pay a rebate when either one of the barriers is hit. Furthermore we discuss more complicated types of barrier options like double knock-in options.
Original language | English |
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Pages (from-to) | 95-105 |
Journal | Finance and Stochastics |
Volume | 4 |
DOIs | |
Publication status | Published - 2000 |
Externally published | Yes |
JEL classifications
- g13 - "Contingent Pricing; Futures Pricing; option pricing"
Keywords
- options pricing
- Laplace transform
- contour integration