A Semi-group Expansion for Pricing Barrier Options
Computational Finance
2014-10-03 v5 Analysis of PDEs
Probability
Abstract
This paper presents a new asymptotic expansion method for pricing continuously monitoring barrier options. In particular, we develops a semi-group expansion scheme for the Cauchy-Dirichlet problem in the second-order parabolic partial differential equations (PDEs) arising in barrier option pricing. As an application, we propose a concrete approximation formula under a stochastic volatility model and demonstrate its validity by some numerical experiments.
Keywords
Cite
@article{arxiv.1202.3002,
title = {A Semi-group Expansion for Pricing Barrier Options},
author = {Takashi Kato and Akihiko Takahashi and Toshihiro Yamada},
journal= {arXiv preprint arXiv:1202.3002},
year = {2014}
}
Comments
29 pages