Two extensions to barrier option valuation

P. Carr

Research output: Contribution to journalArticle

Abstract

We first present a brief but essentially complete survey of the literature on barrier option pricing. We then present two extensions of European up-and-out call option valuation. The first allows for an initial protection period during which the option cannot be knocked out. The second considers an option which is only knocked out if a second asset touches an upper barrier. Closed form solutions, detailed derivations, and the economic rationale for both types of options are provided.

Original languageEnglish (US)
Pages (from-to)173-209
Number of pages37
JournalApplied Mathematical Finance
Volume2
Issue number3
DOIs
StatePublished - Sep 1995

Keywords

  • exotic options
  • option pricing

ASJC Scopus subject areas

  • Finance
  • Applied Mathematics

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