Two extensions to barrier option valuation
AbstractWe first present a brief but essentially complete survey of the literature on barrier option pricing. We then present two extensions of European up-and-out call option valuation. The first allows for an initial protection period during which the option cannot be knocked out. The second considers an option which is only knocked out if a second asset touches an upper barrier. Closed form solutions, detailed derivations, and the economic rationale for both types of options are provided.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 2 (1995)
Issue (Month): 3 ()
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