Analytic Methods for Pricing Double Barrier Options in the Presence of Stochastic Volatility
- While there exist closed-form solutions for vanilla options in the presence of stochastic volatility for nearly a decade, practitioners still depend on numerical methods - in particular the Finite Difference and Monte Carlo methods - in the case of double barrier options. It was only recently that Lipton proposed (semi-)analytical solutions for this special class of path-dependent options. Although he presents two different approaches to derive these solutions, he restricts himself in both cases to a less general model, namely one where the correlation and the interest rate differential are assumed to be zero. Naturally the question arises, if these methods are still applicable for the general stochastic volatility model without these restrictions. In this paper we show that such a generalization fails for both methods. We will explain why this is the case and discuss the consequences of our results.
Verfasser*innenangaben: | Oliver Faulhaber |
---|---|
URN: | urn:nbn:de:hbz:386-kluedo-12421 |
Dokumentart: | Diplomarbeit |
Sprache der Veröffentlichung: | Englisch |
Jahr der Fertigstellung: | 2002 |
Jahr der Erstveröffentlichung: | 2002 |
Veröffentlichende Institution: | Technische Universität Kaiserslautern |
Titel verleihende Institution: | Technische Universität Kaiserslautern |
Datum der Publikation (Server): | 20.01.2003 |
Freies Schlagwort / Tag: | Doppelbarriereoption; Stochastische Volatilität Double Barrier Option; Stochastic Volatility |
Fachbereiche / Organisatorische Einheiten: | Kaiserslautern - Fachbereich Mathematik |
DDC-Sachgruppen: | 5 Naturwissenschaften und Mathematik / 510 Mathematik |
Lizenz (Deutsch): | Standard gemäß KLUEDO-Leitlinien vor dem 27.05.2011 |