Pricing Discrete Barrier Options Under Stochastic Volatility

Kenichiro Shiraya, Akihiko Takahashi and Toshihiro Yamada ()

Asia-Pacific Financial Markets, 2012, vol. 19, issue 3, 205-232

Abstract: This paper proposes a new approximation method for pricing barrier options with discrete monitoring under stochastic volatility environment. In particular, the integration-by-parts formula and the duality formula in Malliavin calculus are effectively applied in pricing barrier options with discrete monitoring. To the best of our knowledge, this paper is the first one that shows an analytical approximation for pricing discrete barrier options with stochastic volatility models. Furthermore, it provides numerical examples for pricing double barrier call options with discrete monitoring under Heston and λ-SABR models. Copyright Springer Science+Business Media, LLC. 2012

Keywords: Discrete barrier option; Barrier option; Knock-out option; Double barrier option; Stochastic volatility; CEV model; Heston model; SABR model; λ-SABR model; Asymptotic expansion; Malliavin calculus (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10690-011-9147-3 (text/html)
Access to full text is restricted to subscribers.

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:kap:apfinm:v:19:y:2012:i:3:p:205-232

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10690/PS2

DOI: 10.1007/s10690-011-9147-3

Access Statistics for this article

Asia-Pacific Financial Markets is currently edited by Jiro Akahori

More articles in Asia-Pacific Financial Markets from Springer, Japanese Association of Financial Economics and Engineering
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().