An Asymptotic Expansion Formula for Up-and-Out Barrier Option Price under Stochastic Volatility Model

Takashi Kato, Akihiko Takahashi and Toshihiro Yamada
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Takashi Kato: Graduate School of Engineering Science, Osaka University
Akihiko Takahashi: Faculty of Economics, University of Tokyo
Toshihiro Yamada: Graduate School of Economics, University of Tokyo and & MTEC

No CIRJE-F-873, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper derives a new semi closed-form approximation formula for pricing an upand- out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed by Kato, Takahashi and Yamada [1]. We also demonstrate the validity of our approximation method through numerical examples.

Pages: 10 pages
Date: 2013-01
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2013cf873

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