APPLICATION OF THE KUSUOKA APPROXIMATION TO BARRIER OPTIONS

Shigeto Kusuoka, Mariko Ninomiya and Syoiti Ninomiya
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Shigeto Kusuoka: Graduate School of Mathematical Sciences, The University of Tokyo
Mariko Ninomiya: Graduate School of Economics, University of Tokyo
Syoiti Ninomiya: Center for Research in Advanced Financial Technology, Tokyo Institute of Technology

No CARF-F-277, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: The authors focuses on numerical experiments of application of the Kusuoka approximation to pricing barrier options which is one of the problems with a boundary condition. The killing functions play a role of giving probability of hitting the boundary. The numerical experiments show that second-order approximation is achieved as done in pricing European style options ([3][4]).

Pages: 9 pages
Date: 2012-03
New Economics Papers: this item is included in nep-cmp
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Citations: View citations in EconPapers (1)

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