Knock-in options of an uncertain stock model with floating interest rate

Lifen Jia and Wei Chen

Chaos, Solitons & Fractals, 2020, vol. 141, issue C

Abstract: Knock-in options are a type of barrier options which are path-dependent and get activated if the prices of underlying assets reach predetermined levels. This paper studies knock-in options in an uncertain market where the stock price follows a geometric process and the interest rate is dynamic. Pricing formulas of the knock-in call options and put options are derived by means of α-paths of uncertain differential equations. Numerical algorithms are designed and illustrated via some numerical experiments.

Keywords: Barrier option; Uncertain finance; Uncertain differential equation; Option pricing formula (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:141:y:2020:i:c:s0960077920307190

DOI: 10.1016/j.chaos.2020.110324

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