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An Asymptotic Expansion Formula for Up-and-Out Barrier Option Price under Stochastic Volatility Model

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Author Info

  • Takashi Kato

    (Graduate School of Engineering Science, Osaka University)

  • Akihiko Takahashi

    (Faculty of Economics, University of Tokyo)

  • Toshihiro Yamada

    (Graduate School of Economics, University of Tokyo and & MTEC)

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    Abstract

    This paper derives a new semi closed-form approximation formula for pricing an upand- out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed by Kato, Takahashi and Yamada [1]. We also demonstrate the validity of our approximation method through numerical examples.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2013/2013cf873.pdf
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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-873.

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    Length: 10 pages
    Date of creation: Jan 2013
    Date of revision:
    Handle: RePEc:tky:fseres:2013cf873

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