Abstract:Focus, in the past four decades, has been obtaining closed-form expressions for the no-arbitrage prices and hedges of modified versions of the Europeanoptions, allowing the dynamic of the underlying assets to have non-constant pa-rameters.In this paper, we obtain a closed-form expression for the price and hedge of an up-and-out European barrier option, assuming that the volatility in the dynamicof the risky asset is an arbitrary deterministic function of time. Setting a con-stant volatility, the formulas recov… Show more
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