Pricing of Barrier Options on Underlying Assets with Jump-Diffusion Dynamics: A Mellin Transform Approach

Marianito R. Rodrigo
Additional contact information
Marianito R. Rodrigo: School of Mathematics and Applied Statistics, University of Wollongong, Wollongong, NSW 2522, Australia

Mathematics, 2020, vol. 8, issue 8, 1-20

Abstract: A barrier option is an exotic path-dependent option contract where the right to buy or sell is activated or extinguished when the underlying asset reaches a certain barrier price during the lifetime of the contract. In this article we use a Mellin transform approach to derive exact pricing formulas for barrier options with general payoffs and exponential barriers on underlying assets that have jump-diffusion dynamics. With the same approach we also price barrier options on underlying futures contracts.

Keywords: barrier options; exponential barriers; jump-diffusion dynamics; options on futures; Mellin transform; Black–Scholes kernel (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7390/8/8/1271/pdf (application/pdf)
https://www.mdpi.com/2227-7390/8/8/1271/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:8:y:2020:i:8:p:1271-:d:393805

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().