"A Semi-group Expansion for Pricing Barrier Options"
This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial differential equations (PDEs) arising in barrier option pricing. As an application, we propose a concrete approximation formula under a stochastic volatility model and demonstrate its validity by some numerical experiments.
Year of publication: |
2012-02
|
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Authors: | Kato, Takashi ; Takahashi, Akihiko ; Yamada, Toshihiro |
Institutions: | Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics |
Saved in:
freely available
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