IDEAS home Printed from https://ideas.repec.org/a/eee/dyncon/v31y2007i3p826-860.html
   My bibliography  Save this article

Analysis of quadrature methods for pricing discrete barrier options

Author

Listed:
  • Fusai, Gianluca
  • Recchioni, Maria Cristina

Abstract

No abstract is available for this item.

Suggested Citation

  • Fusai, Gianluca & Recchioni, Maria Cristina, 2007. "Analysis of quadrature methods for pricing discrete barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 826-860, March.
    • Handle: RePEc:eee:dyncon:v:31:y:2007:i:3:p:826-860
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165-1889(06)00042-X
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dilip B. Madan & Peter P. Carr & Eric C. Chang, 1998. "The Variance Gamma Process and Option Pricing," Review of Finance, European Finance Association, vol. 2(1), pages 79-105.
    2. Jin-Chuan Duan & Evan Dudley & Geneviève Gauthier & Jean-Guy Simonato, 1999. "Pricing Discretely Monitored Barrier Options by a Markov Chain," CIRANO Working Papers 99s-15, CIRANO.
    3. Emanuel, David C. & MacBeth, James D., 1982. "Further Results on the Constant Elasticity of Variance Call Option Pricing Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(4), pages 533-554, November.
    4. Farid Aitsahlia & Tzeung Le Lai, 1998. "Random walk duality and the valuation of discrete lookback options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 5(3-4), pages 227-240.
    5. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
    6. Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
    7. Naoto Kunitomo & Masayuki Ikeda, 1992. "Pricing Options With Curved Boundaries1," Mathematical Finance, Wiley Blackwell, vol. 2(4), pages 275-298, October.
    8. Zvan, R. & Vetzal, K. R. & Forsyth, P. A., 2000. "PDE methods for pricing barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1563-1590, October.
    9. Madan, Dilip B & Seneta, Eugene, 1990. "The Variance Gamma (V.G.) Model for Share Market Returns," The Journal of Business, University of Chicago Press, vol. 63(4), pages 511-524, October.
    10. M. A. H. Dempster & D. G. Richards, 2000. "Pricing American Options Fitting the Smile," Mathematical Finance, Wiley Blackwell, vol. 10(2), pages 157-177, April.
    11. Goldenberg, David H., 1991. "A unified method for pricing options on diffusion processes," Journal of Financial Economics, Elsevier, vol. 29(1), pages 3-34, March.
    12. C. F. Lo & P. H. Yuen & C. H. Hui, 2001. "Pricing Barrier Options With Square Root Process," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 4(05), pages 805-818.
    13. Hélyette Geman & Marc Yor, 1996. "Pricing And Hedging Double‐Barrier Options: A Probabilistic Approach," Mathematical Finance, Wiley Blackwell, vol. 6(4), pages 365-378, October.
    14. Figlewski, Stephen & Gao, Bin, 1999. "The adaptive mesh model: a new approach to efficient option pricing," Journal of Financial Economics, Elsevier, vol. 53(3), pages 313-351, September.
    15. Boyle, Phelim P. & Tian, Yisong “Sam”, 1999. "Pricing Lookback and Barrier Options under the CEV Process," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(2), pages 241-264, June.
    16. Broadie, Mark & Detemple, Jerome, 1996. "American Option Valuation: New Bounds, Approximations, and a Comparison of Existing Methods," The Review of Financial Studies, Society for Financial Studies, vol. 9(4), pages 1211-1250.
    17. Andricopoulos, Ari D. & Widdicks, Martin & Duck, Peter W. & Newton, David P., 2003. "Universal option valuation using quadrature methods," Journal of Financial Economics, Elsevier, vol. 67(3), pages 447-471, March.
    18. Mark Broadie & Paul Glasserman & Steven Kou, 1997. "A Continuity Correction for Discrete Barrier Options," Mathematical Finance, Wiley Blackwell, vol. 7(4), pages 325-349, October.
    19. Hélyette Geman & Dilip B. Madan & Marc Yor, 2001. "Time Changes for Lévy Processes," Mathematical Finance, Wiley Blackwell, vol. 11(1), pages 79-96, January.
    20. Dmitry Davydov & Vadim Linetsky, 2001. "Pricing and Hedging Path-Dependent Options Under the CEV Process," Management Science, INFORMS, vol. 47(7), pages 949-965, July.
    21. Phelim Boyle & Yisong Tian, 1998. "An explicit finite difference approach to the pricing of barrier options," Applied Mathematical Finance, Taylor & Francis Journals, vol. 5(1), pages 17-43.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Golbabai & L. Ballestra & D. Ahmadian, 2014. "A Highly Accurate Finite Element Method to Price Discrete Double Barrier Options," Computational Economics, Springer;Society for Computational Economics, vol. 44(2), pages 153-173, August.
    2. Keegan Mendonca & Vasileios E. Kontosakos & Athanasios A. Pantelous & Konstantin M. Zuev, 2018. "Efficient Pricing of Barrier Options on High Volatility Assets using Subset Simulation," Papers 1803.03364, arXiv.org, revised Mar 2018.
    3. Jin, Ting & Ding, Hui & Xia, Hongxuan & Bao, Jinfeng, 2021. "Reliability index and Asian barrier option pricing formulas of the uncertain fractional first-hitting time model with Caputo type," Chaos, Solitons & Fractals, Elsevier, vol. 142(C).
    4. Lingfei Li & Vadim Linetsky, 2015. "Discretely monitored first passage problems and barrier options: an eigenfunction expansion approach," Finance and Stochastics, Springer, vol. 19(4), pages 941-977, October.
    5. Wendong Zheng & Chi Hung Yuen & Yue Kuen Kwok, 2016. "Recursive Algorithms For Pricing Discrete Variance Options And Volatility Swaps Under Time-Changed Lévy Processes," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-29, March.
    6. Amirhossein Sobhani & Mariyan Milev, 2017. "A Numerical Method for Pricing Discrete Double Barrier Option by Lagrange Interpolation on Jacobi Node," Papers 1712.01060, arXiv.org, revised Feb 2018.
    7. Kontosakos, Vasileios E. & Mendonca, Keegan & Pantelous, Athanasios A. & Zuev, Konstantin M., 2021. "Pricing discretely-monitored double barrier options with small probabilities of execution," European Journal of Operational Research, Elsevier, vol. 290(1), pages 313-330.
    8. Saadet Eskiizmirliler & Korhan Günel & Refet Polat, 2021. "On the Solution of the Black–Scholes Equation Using Feed-Forward Neural Networks," Computational Economics, Springer;Society for Computational Economics, vol. 58(3), pages 915-941, October.
    9. Fusai, Gianluca & Germano, Guido & Marazzina, Daniele, 2016. "Spitzer identity, Wiener-Hopf factorization and pricing of discretely monitored exotic options," European Journal of Operational Research, Elsevier, vol. 251(1), pages 124-134.
    10. Amirhossein Sobhani & Mariyan Milev, 2017. "A Numerical Method for Pricing Discrete Double Barrier Option by Legendre Multiwavelet," Papers 1703.09129, arXiv.org, revised Mar 2017.
    11. Fusai, Gianluca & Meucci, Attilio, 2008. "Pricing discretely monitored Asian options under Levy processes," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2076-2088, October.
    12. Hideharu Funahashi & Masaaki Kijima, 2016. "Analytical pricing of single barrier options under local volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 16(6), pages 867-886, June.
    13. Kirkby, J. Lars, 2023. "Hybrid equity swap, cap, and floor pricing under stochastic interest by Markov chain approximation," European Journal of Operational Research, Elsevier, vol. 305(2), pages 961-978.
    14. Gongqiu Zhang & Lingfei Li, 2021. "A General Approach for Lookback Option Pricing under Markov Models," Papers 2112.00439, arXiv.org.
    15. Lian, Guanghua & Zhu, Song-Ping & Elliott, Robert J. & Cui, Zhenyu, 2017. "Semi-analytical valuation for discrete barrier options under time-dependent Lévy processes," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 167-183.
    16. Dai, Min & Li, Peifan & Zhang, Jin E., 2010. "A lattice algorithm for pricing moving average barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 542-554, March.
    17. Jie Chen & Liaoyuan Fan & Lingfei Li & Gongqiu Zhang, 2022. "A multidimensional Hilbert transform approach for barrier option pricing and survival probability calculation," Review of Derivatives Research, Springer, vol. 25(2), pages 189-232, July.
    18. Rahman Farnoosh & Hamidreza Rezazadeh & Amirhossein Sobhani & M. Hossein Beheshti, 2016. "A Numerical Method for Discrete Single Barrier Option Pricing with Time-Dependent Parameters," Computational Economics, Springer;Society for Computational Economics, vol. 48(1), pages 131-145, June.
    19. Sorawit Saengkyongam & Anthony Hayter & Seksan Kiatsupaibul & Wei Liu, 2020. "Efficient computation of the stochastic behavior of partial sum processes," Computational Statistics, Springer, vol. 35(1), pages 343-358, March.
    20. Sesana, Debora & Marazzina, Daniele & Fusai, Gianluca, 2014. "Pricing exotic derivatives exploiting structure," European Journal of Operational Research, Elsevier, vol. 236(1), pages 369-381.
    21. Christoph Becker & Uwe Wystup, 2009. "On the cost of delayed currency fixing announcements," Annals of Finance, Springer, vol. 5(2), pages 161-174, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lian, Guanghua & Zhu, Song-Ping & Elliott, Robert J. & Cui, Zhenyu, 2017. "Semi-analytical valuation for discrete barrier options under time-dependent Lévy processes," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 167-183.
    2. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    3. Kontosakos, Vasileios E. & Mendonca, Keegan & Pantelous, Athanasios A. & Zuev, Konstantin M., 2021. "Pricing discretely-monitored double barrier options with small probabilities of execution," European Journal of Operational Research, Elsevier, vol. 290(1), pages 313-330.
    4. Campi, Luciano & Polbennikov, Simon & Sbuelz, Alessandro, 2009. "Systematic equity-based credit risk: A CEV model with jump to default," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 93-108, January.
    5. Shane Miller, 2007. "Pricing of Contingent Claims Under the Real-World Measure," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2007, January-A.
    6. Luciano Campi & Simon Polbennikov & Sbuelz, 2005. "Assessing Credit with Equity: A CEV Model with Jump to Default," Working Papers 24/2005, University of Verona, Department of Economics.
    7. Dmitry Davydov & Vadim Linetsky, 2003. "Pricing Options on Scalar Diffusions: An Eigenfunction Expansion Approach," Operations Research, INFORMS, vol. 51(2), pages 185-209, April.
    8. Zvan, R. & Vetzal, K. R. & Forsyth, P. A., 2000. "PDE methods for pricing barrier options," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1563-1590, October.
    9. Vidal Nunes, João Pedro & Ruas, João Pedro & Dias, José Carlos, 2015. "Pricing and static hedging of American-style knock-in options on defaultable stocks," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 343-360.
    10. Igor V. Kravchenko & Vladislav V. Kravchenko & Sergii M. Torba & José Carlos Dias, 2019. "Pricing Double Barrier Options On Homogeneous Diffusions: A Neumann Series Of Bessel Functions Representation," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(06), pages 1-24, September.
    11. Carole Bernard & Phelim Boyle, 2011. "Monte Carlo methods for pricing discrete Parisian options," The European Journal of Finance, Taylor & Francis Journals, vol. 17(3), pages 169-196.
    12. Campi, L. & Polbennikov, S.Y. & Sbuelz, A., 2005. "Assessing Credit with Equity : A CEV Model with Jump to Default," Discussion Paper 2005-27, Tilburg University, Center for Economic Research.
    13. Campi, L. & Sbuelz, A., 2005. "Close-Form Pricing of Benchmark Equity Default Swaps Under the CEV Assumption," Discussion Paper 2005-28, Tilburg University, Center for Economic Research.
    14. Aricson Cruz & José Carlos Dias, 2020. "Valuing American-style options under the CEV model: an integral representation based method," Review of Derivatives Research, Springer, vol. 23(1), pages 63-83, April.
    15. Shane Miller, 2007. "Pricing of Contingent Claims Under the Real-World Measure," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 25, July-Dece.
    16. S. G. Kou, 2002. "A Jump-Diffusion Model for Option Pricing," Management Science, INFORMS, vol. 48(8), pages 1086-1101, August.
    17. Keegan Mendonca & Vasileios E. Kontosakos & Athanasios A. Pantelous & Konstantin M. Zuev, 2018. "Efficient Pricing of Barrier Options on High Volatility Assets using Subset Simulation," Papers 1803.03364, arXiv.org, revised Mar 2018.
    18. Igor V. Kravchenko & Vladislav V. Kravchenko & Sergii M. Torba & Jos'e Carlos Dias, 2017. "Pricing double barrier options on homogeneous diffusions: a Neumann series of Bessel functions representation," Papers 1712.08247, arXiv.org.
    19. Shane Miller & Eckhard Platen, 2010. "Real-World Pricing for a Modified Constant Elasticity of Variance Model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 17(2), pages 147-175.
    20. Jia‐Hau Guo & Lung‐Fu Chang, 2020. "Repeated Richardson extrapolation and static hedging of barrier options under the CEV model," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(6), pages 974-988, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:31:y:2007:i:3:p:826-860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jedc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.