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Double barrier American put option pricing under uncertain volatility model

Author

Listed:
  • El Kharrazi Zaineb

    (Engineering Sciences and Energy Management Laboratory, National School of Applied Science, Ibn Zohr University, Agadir, Morocco)

  • Saoud Sahar

    (#x2020;Technical Research Laboratory, Faculty of Applied Sciences, Ibn Zohr University Agadir, Morocco)

  • Mahani Zouhir

    (Engineering Sciences and Energy Management Laboratory, National School of Applied Science, Ibn Zohr University, Agadir, Morocco)

Abstract

This paper aims to study the asymptotic behavior of double barrier American-style put option prices under an uncertain volatility model, which degenerates to a single point. We give an approximation of the double barrier American-style option prices with a small volatility interval, expressed by the Black–Scholes–Barenblatt equation. Then, we propose a novel representation for the early exercise boundary of American-style double barrier options in terms of the optimal stopping boundary of a single barrier contract.

Suggested Citation

  • El Kharrazi Zaineb & Saoud Sahar & Mahani Zouhir, 2021. "Double barrier American put option pricing under uncertain volatility model," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-16, June.
    • Handle: RePEc:wsi:ijfexx:v:08:y:2021:i:02:n:s2424786321500389
    DOI: 10.1142/S2424786321500389
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