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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Abstract: This paper derives a new semi closed-form approximation formula for pricing an up-and-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 (2012). We also demonstrate the validity of our approximation method through numerical examples.

Date: 2013-02
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Citations: View citations in EconPapers (12)

Published in JSIAM Letters Vol. 5 (2013) p.17-20

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