Extension of the corrected barrier approximation by Broadie, Glasserman, and Kou

Per Hörfelt ()
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Per Hörfelt: Department of Mathematics, Chalmers University of Technology, SE-412 96 Göteborg, Sweden Manuscript

Finance and Stochastics, 2003, vol. 7, issue 2, 243 pages

Abstract: This paper considers the problem of pricing discrete barrier options. A discrete barrier option is a barrier option where the barrier is monitored only at specific dates. This paper continues the work initiated by Broadie et al. in [B-G-K] and determine formulas to estimate the price of discrete up-and-out/in calls, down-and-out/in puts and double barrier options. Numerical examples presented in this paper show that the formulas yield good results.

Keywords: Option pricing; discrete barrier options; heavy traffic approximation (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2002-12-10
Note: received: February 2001; final version received: April 2002
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