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Pricing multi-asset options with an external barrier. (English) Zbl 0987.91030

This paper derives formulas for valuing European options on one or multiple assets in the presence of an external barrier. An external barrier means that there is a stochastic variable which determines whether the option is knocked in or out when the value of the variable is above or below some predetermined level. Here, the barrier level is exponential. A fractional step finite difference scheme is proposed for numerical calculation.

MSC:

91B28 Finance etc. (MSC2000)
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[1] DOI: 10.2307/2330963
[2] DOI: 10.1287/mnsc.37.12.1640 · Zbl 0825.90061
[3] Rich D. R., Options Research 7 pp 267– (1994)
[4] Ritchken P., Winter 199 pp 19–
[5] DOI: 10.1016/0304-405X(82)90011-3
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.