Path Integral Method for Pricing Proportional Step Double-Barrier Option with Time Dependent Parameters
Pricing of Securities
2023-02-16 v1 Quantum Physics
Abstract
Path integral method in quantum mechanics provides a new thinking for barrier option pricing. For proportional double-barrier step (PDBS) options, the option price changing process is analogous to a particle moving in a finite symmetric square potential well. We have derived the pricing kernel of PDBS options with time dependent interest rate and volatility. Numerical results of option price as a function of underlying asset price are shown as well. Path integral method can be easily generalized to the pricing of PDBS options with curved boundaries.
Keywords
Cite
@article{arxiv.2302.07631,
title = {Path Integral Method for Pricing Proportional Step Double-Barrier Option with Time Dependent Parameters},
author = {Qi Chen and Chao Guo},
journal= {arXiv preprint arXiv:2302.07631},
year = {2023}
}
Comments
18 pages, 3 figures, 1 table. arXiv admin note: substantial text overlap with arXiv:2209.12542