6533b7d3fe1ef96bd12612f6
RESEARCH PRODUCT
Valuation of Barrier Options in a Black-Scholes Setup with Jump Risk
Dietmar Leisensubject
Datar–Mathews method for real option valuationComputer scienceValuation of optionsJumpBarrier optionApplied mathematicsTrinomial treeBinomial options pricing modelBlack–Scholes modelBlack–Scholes equationMathematical economicsdescription
This paper discusses the pitfalls in the pricing of barrier options approximations of the underlying continuous processes via discrete lattice models. These problems are studied first in a Black-Scholes model. Improvements result from a trinomial model and a further modified model where price changes occur at the jump times of a Poisson process. After the numerical difficulties have been resolved in the Black-Scholes model, unpredictable discontinuous price movements are incorporated.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 1999-01-01 | SSRN Electronic Journal |