A study of pricing barrier options by analytic methods

Pao Yue-kong Library Electronic Theses Database

A study of pricing barrier options by analytic methods

 

Author: Lam, Chi-keung
Title: A study of pricing barrier options by analytic methods
Degree: M.Sc.
Year: 2000
Subject: Options (Finance) -- Prices -- Mathematical models
Hong Kong Polytechnic University -- Dissertations
Department: Multi-disciplinary Studies
Dept. of Applied Mathematics
Pages: 49 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1523569
URI: http://theses.lib.polyu.edu.hk/handle/200/4594
Abstract: Double barrier options have become popular instruments in derivative markets. One of the reasons why barrier options have become so popular is the fact that they are cheaper than standard options, but offer a similar kind of protection. In recent paper, pricing of barrier options has been implemented by analytical transform methods such as Fourier and Laplace transforms. However, it has to resort to numerical inversion of these transforms to obtain option prices. In this project, I am able to solve the inverse of the Fourier and Laplace transforms analytically. Therefore, the need for numerical inversion routines can be avoided. To illustrate the power of this analytical method, I derive the analytical valuation formulas for much wider variety of barrier options.

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