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The valuation of barrier options prices : A methods review

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  • Kabby, Williams

Abstract

This paper aims to identify existing methods to price barrier options. The question of research is to know main methods used to price barrier options. Findings of literature review based on four pricing models, which are used. In addition, they are most popular than other ones are recently known. Barrier options are some financial products qualified derivatives. Their functioning depends on the prices evolution that the underlying assets have taken during the lifetime. Barrier options have to be knocked out or activated if the barrier option price reaches the agreed limit or barrier. There are European, American and eight (08) types of barrier options

Suggested Citation

  • Kabby, Williams, 2022. "The valuation of barrier options prices : A methods review," MPRA Paper 117460, University Library of Munich, Germany, revised 12 Aug 2022.
    • Handle: RePEc:pra:mprapa:117460
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    File URL: https://mpra.ub.uni-muenchen.de/117460/1/barrier%20evaluation%20PDF.pdf
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    References listed on IDEAS

    as
    1. Cecilia Maya Ochoa, 2004. "Monte Carlo Option Pricing," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 61, pages 53-70, Julio-Dic.
    2. Gao, Bin & Huang, Jing-zhi & Subrahmanyam, Marti, 2000. "The valuation of American barrier options using the decomposition technique," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1783-1827, October.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    barrier options; pricing models; tree methods; Monte Carlo methods; standard European options;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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