Cross a barrier to reach barrier options

Jun, Doobae; Ku, Hyejin

doi:10.1016/j.jmaa.2011.12.038

Cited by 15 publications

(13 citation statements)

References 5 publications

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“…Jun and Ku [8] found the exact formula of chained barrier options where the monitoring of the barrier begins at a random time as the underlying asset first crosses two barrier levels in a specified order. The authors also addressed the pricing formula of chained barrier options with exponential barriers [9].…”

Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

“…Jun and Ku [8] derived the pricing formula of chained barrier options using the reflection property and the change of measure and computing the given expectation directly under a risk-neutral probability. However, if we are attempting to calculate the expectation directly after implementing the change of measure under an equivalent martingale measure in case of the externalchained barrier option, then the computation of the barrier option price may be more complicated than the case of the chained barrier option mentioned in Jun and Ku [8] because the dynamics of the assets of the external-chained barrier option are those of a two-factor model.…”

Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

“…However, if we are attempting to calculate the expectation directly after implementing the change of measure under an equivalent martingale measure in case of the externalchained barrier option, then the computation of the barrier option price may be more complicated than the case of the chained barrier option mentioned in Jun and Ku [8] because the dynamics of the assets of the external-chained barrier option are those of a two-factor model. Hence, to compute the closedform formula of the external-chained barrier option with exponential barriers effectively and easily, we utilize the external European barrier option price described in Section 2.…”

Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

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Pricing External-Chained Barrier Options With Exponential Barriers

Jeon¹,

Yoon²

2016

Bulletin of the Korean Mathematical Society

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Abstract. External barrier options are two-asset options with stochastic variables where the payoff depends on one underlying asset and the barrier depends on another state variable. The barrier state variable determines whether the option is knocked in or out when the value of the variable is above or below some prescribed barrier level. This paper derives the explicit analytic solution of the chained option with an external single or double barrier by utilizing the probabilistic methods -the reflection principle and the change of measure. Before we do this, we examine the closed-form solution of the external barrier option with a single or doublecurved barrier using the methods of image and double Mellin transforms. The exact solution of the external barrier option price enables us to obtain the pricing formula of the chained option with the external barrier more easily.

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Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

Section: Junkee Jeon and Ji-hun Yoonmentioning

confidence: 99%

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Pricing External-Chained Barrier Options With Exponential Barriers

Jeon¹,

Yoon²

2016

Bulletin of the Korean Mathematical Society

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“…Recently, Jun and Ku [4], [5] introduced a new-type barrier option named as a chained option. The chained option is an option when two or more barrier options are chained together.…”

Section: Introductionmentioning

confidence: 99%

Pricing of Quanto Chained Options

Geonwoo¹

2016

Communications of the Korean Mathematical Society

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Abstract. A chained option is a barrier option activated in the event that the underlying asset price crosses barrier or barriers prior to maturity in a specified order. In this paper, we study the pricing of chained options with the quanto property called the "Quanto chained option". A quanto chained option is a chained option starting at time when the foreign exchange rate has the multiple crossing of specified barriers. We provide closed-form formulas for valuing the quanto chained options based on probabilistic approach.

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“…Adjusted payoff of DOu with f(ST) = (ST − K) + (option parameters: K = 95, U = 102, D = 98, r = 0.05, Adjusted payoff of DOu with f(ST) = (K − ST) + (option parameters: K = 100, U = 102, D = 98, r = 0.05, d = 0, = 0.1).exact values are calculated from the closed formulae inJun and Ku (2012), and the numerical values are obtained by Monte Carlo simulations.…”

mentioning

confidence: 99%