CONTINUOUSLY MONITORED BARRIER OPTIONS UNDER MARKOV PROCESSES

被引：67
|
作者：
Mijatovic, Aleksandar [1 ]
Pistorius, Martijn [2 ]
机构：
[1] Univ Warwick, Dept Stat, Coventry CV4 7AL, W Midlands, England
[2] Univ London Imperial Coll Sci Technol & Med, London SW7 2AZ, England
来源：
MATHEMATICAL FINANCE | 2013年 / 23卷 / 01期
基金：
英国工程与自然科学研究理事会;
关键词：
pricing algorithms; barrier options; continuous-time Markov chain; local volatility models with jumps; Levy processes; normal inverse Gaussian process; variance Gamma process; CGMY model; Sato processes; local Levy processes; MODEL; VOLATILITY; PRICES;
D O I：
10.1111/j.1467-9965.2011.00486.x
中图分类号：
F8 [财政、金融];
学科分类号：
0202 ;
摘要：
In this paper, we present an algorithm for pricing barrier options in one-dimensional Markov models. The approach rests on the construction of an approximating continuous-time Markov chain that closely follows the dynamics of the given Markov model. We illustrate the method by implementing it for a range of models, including a local Levy process and a local volatility jump-diffusion. We also provide a convergence proof and error estimates for this algorithm.
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页码：1 / 38
页数：38
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