Path Integral Method for Proportional Step and Proportional Double-Barrier Step Option Pricing

Qi Chen and Chao Guo

Papers from arXiv.org

Abstract: Path integral method in quantum mechanics provides a new thinking for barrier option pricing. For proportional step options, the option price changing process is similar to the one dimensional trapezoid potential barrier scattering problem in quantum mechanics; for double-barrier step options, the option price changing process is analogous to a particle moving in a finite symmetric square potential well. Using path integral method, the analytical expressions of pricing kernel and option price could be derived. Numerical results of option price as a function of underlying price, potential and exercise price are shown, which are consistent with the results given by mathematical method.

Date: 2021-12, Revised 2022-06
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2112.09534 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: https://EconPapers.repec.org/RePEc:arx:papers:2112.09534

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().