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Analytical valuation of a general form of barrier option with stochastic interest rate and jumps

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  • Tristan Guillaume

    (CY Cergy Paris Université)

Abstract

This article provides exact valuation formulae for barrier options with a stochastic, outside and window barrier, in a model allowing for stochastic interest rate and jumps in the underlying asset. The case of a best-of option with the same barrier and model specifications is also covered. Formulae in the classical, more restrictive Black–Scholes environment are derived too. These analytical results are numerically implemented and the obtained values are compared with Monte Carlo approximations.

Suggested Citation

  • Tristan Guillaume, 2025. "Analytical valuation of a general form of barrier option with stochastic interest rate and jumps," Review of Derivatives Research, Springer, vol. 28(2), pages 1-44, July.
    • Handle: RePEc:kap:revdev:v:28:y:2025:i:2:d:10.1007_s11147-025-09215-6
    DOI: 10.1007/s11147-025-09215-6
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    References listed on IDEAS

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    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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