 CLOSED FORM FORMULAS FOR EXOTIC OPTIONS AND THEIR LIFETIME DISTRIBUTIONInternational Journal of Theoretical and Applied Finance (IJTAF), 1999, vol. 02, issue 01, 17-42 Abstract: We first recall the well-known expression of the price of barrier options, and compute double barrier options by the mean of the iterated mirror principle. The formula for double barriers provides an intraday volatility estimator from the information of high-low-close prices. Then we give explicit formulas for the probability distribution function and the expectation of the exit time of single and double barrier options. These formulas allow to price time independent and time dependent rebates. They are also helpful to hedge barrier and double barrier options, when taking into account variations of the term structure of interest rates and of volatility. We also compute the price of rebates of double knock-out options that depend on which barrier is hit first, and of the BOOST, an option which pays the time spent in a corridor. All these formulas are either in closed form or double infinite series which converge likee-α n2. Keywords: Double barrier options; Closed forms; First hitting time; JEL classification G130 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:02:y:1999:i:01:n:s0219024999000030 Ordering information: This journal article can be ordered from DOI: 10.1142/S0219024999000030 Access Statistics for this article International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.