Risk-neutral valuation of power barrier options |
| |
Authors: | Siti Nur Iqmal Ibrahim John G O’Hara Nick Constantinou |
| |
Institution: | 1. Centre for Computational Finance & Economic Agents (CCFEA), University of Essex, Colchester CO4 3SQ, United Kingdom;2. Essex Business School(EBS), University of Essex, Colchester CO4 3SQ, United Kingdom;3. Department of Mathematics, Faculty of Science, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia |
| |
Abstract: | Barrier options are standard exotic options traded in the financial market. These instruments are different from the vanilla options as the payoff of the option depends on whether the underlying asset price reaches a predetermined barrier level, during the life of the option. In this work, we extend the vanilla call barrier options to power call barrier options where the underlying asset price is raised to a constant power, within the standard Black–Scholes framework. It is demonstrated that the pricing of the power barrier options can be obtained from standard barrier options by a transformation which involves the power contract and a adjusted barrier. Numerical results are considered. |
| |
Keywords: | |
本文献已被 ScienceDirect 等数据库收录! |
|