Economics at your fingertips  

Pricing double barrier options on homogeneous diffusions: a Neumann series of Bessel functions representation

Igor V. Kravchenko, Vladislav V. Kravchenko, Sergii M. Torba and Jos\'e Carlos Dias

Papers from

Abstract: This paper develops a novel analytically tractable Neumann series of Bessel functions representation for pricing (and hedging) European-style double barrier knock-out options, which can be applied to the whole class of one-dimensional time-homogeneous diffusions even for the cases where the corresponding transition density is not known. The proposed numerical method is shown to be efficient and simple to implement. To illustrate the flexibility and computational power of the algorithm, we develop an extended jump to default model that is able to capture several empirical regularities commonly observed in the literature.

New Economics Papers: this item is included in nep-cmp and nep-rmg
Date: 2017-12
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) Latest version (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:

Access Statistics for this paper

More papers in Papers from
Series data maintained by arXiv administrators ().

Page updated 2018-01-20
Handle: RePEc:arx:papers:1712.08247