Abstract

Discrete barrier options are the options whose payoffs are determined by underlying prices at a finite set of times. We consider the discrete barrier option with two barriers. Broadie et al. (1997) [16] proposed a continuity correction for the discretely monitored barrier option. We extend this idea to barrier option with two barriers. The proof for discrete chained barrier option is provided and numerical results show the continuity correction approximation is remarkably accurate.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call