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Extension of the corrected barrier approximation by Broadie, Glasserman, and Kou


  • Per Hörfelt

    () (Department of Mathematics, Chalmers University of Technology, SE-412 96 Göteborg, Sweden Manuscript)


This paper considers the problem of pricing discrete barrier options. A discrete barrier option is a barrier option where the barrier is monitored only at specific dates. This paper continues the work initiated by Broadie et al. in [B-G-K] and determine formulas to estimate the price of discrete up-and-out/in calls, down-and-out/in puts and double barrier options. Numerical examples presented in this paper show that the formulas yield good results.

Suggested Citation

  • Per Hörfelt, 2003. "Extension of the corrected barrier approximation by Broadie, Glasserman, and Kou," Finance and Stochastics, Springer, vol. 7(2), pages 231-243.
  • Handle: RePEc:spr:finsto:v:7:y:2003:i:2:p:231-243
    Note: received: February 2001; final version received: April 2002

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    More about this item


    Option pricing; discrete barrier options; heavy traffic approximation;

    JEL classification:

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


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