Pricing double-barrier options under a flexible jump diffusion model |
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| Authors: | Ning Cai Xiangwei Wan |
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| Institution: | a Department of Industrial Engineering and Logistics Management, The Hong Kong University of Science and Technology, Hong Kong
b Department of System Engineering and Engineering Management, The Chinese University of Hong Kong, Hong Kong |
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| Abstract: | In this paper we present a Laplace transform-based analytical solution for pricing double-barrier options under a flexible hyper-exponential jump diffusion model (HEM). The major theoretical contribution is that we prove non-singularity of a related high-dimensional matrix, which guarantees the existence and uniqueness of the solution. |
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| Keywords: | Double-barrier options Jump diffusion First passage times Hyper-exponential distribution Euler inversion algorithm |
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