PRICING AND HEDGING DOUBLE-BARRIER OPTIONS: A PROBABILISTIC APPROACH
نویسندگان
چکیده
منابع مشابه
Pricing and Hedging Double - Barrier Options : A Probabilistic Approach '
Barrier options have become increasingly popular over the last few years. Less expensive than standard options, they may provide the appropriate hedge in a number of risk management strategies. In the case of a single barrier option, the valuation problem is not very difficult (see Merton 193, Goldman-Sosin-Gatto 1979). The situation where the option gets knocked out when the underlying instrum...
متن کاملPricing Double Barrier Options: An Analytical Approach
Double barrier options have become popular instruments in derivative markets. Several papers have already analysed double knock-out call and put options using di erent methods. In a recent paper, Geman and Yor (1996) derive expressions for the Laplace transform of the double barrrier option price. However, they have to resort to numerical inversion of the Laplace transform to obtain option pric...
متن کاملRobust Hedging of Double Touch Barrier Options
We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the initial prices of call options with the same maturity and all strikes are known. Under such circumstances, we are able to give upper and lower bounds on the arbit...
متن کاملRobust pricing and hedging of double no-touch options
Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of these options based on the prices of more liquidly traded options (call and digital call options). Key steps are the construction of superand sub-hedging strateg...
متن کاملHedging Complex Barrier Options
We show how several complex barrier options can be hedged using a portfolio of standard European options. These hedging strategies only involve trading at a few times during the option’s life. Since rolling, ratchet, and lookback options can be decomposed into a portfolio of barrier options, our hedging results also apply.
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ژورنال
عنوان ژورنال: Mathematical Finance
سال: 1996
ISSN: 0960-1627,1467-9965
DOI: 10.1111/j.1467-9965.1996.tb00122.x