Pricing Rent-to-Own Options with a Barrier Level: Taking Housing Contracts as an Example

Yi-Long Hsiao and Chien-Jung Ting

Journal of Applied Finance & Banking, 2022, vol. 12, issue 5, 3

Abstract: How to effectually price a rent-to-own option embedded a barrier level? This question is an important issue in financial market. For the purpose, we use the boundary integral method of PDE to derive a closed-form approximate solution of the rent-to-own option embedded a barrier level, where the tenant has the right to buy a specified rental house during the duration of contract. This study finds several characteristics through a sequence of numerical analyses and provides an available method for pricing rent-to-own options taking housing contracts with a barrier level as an example. This paper is original research in pricing a rent-to-own option using a boundary integral method and provides a reference to financial market about the valuation of a rent-to-own option embedded a barrier level well. Â JEL classification numbers: C02, G13.

Keywords: Rent-to-own option; Boundary integral method; Green’s function. (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.scienpress.com/Upload/JAFB%2fVol%2012_5_3.pdf (application/pdf)

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:spt:apfiba:v:12:y:2022:i:5:f:12_5_3

Access Statistics for this article

More articles in Journal of Applied Finance & Banking from SCIENPRESS Ltd
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().