Barrier Option Pricing Using Adjusted Transition Probabilities
Barrier Option Pricing Using Adjusted Transition Probabilities
Barrier Option Pricing Using Adjusted Transition Probabilities
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MotivationNew ApproachResultsComparisonWhat is new?Double Knock-out Call with Linear <strong>Barrier</strong>sConvergence Behaviour1.5Down-out European Call with Double Linear <strong>Barrier</strong>sS=100, K=100, vol=25%, rf=10%, L=92, L1=-22, U0=105, U1=105Trinomial Tree (unadjusted)1.3Trinomial Tree (adjusted)1.1<strong>Option</strong> Price0.90.70.50.31 46 91 136 181 226 271 316 361 406 451 496 541 586 631 676 721 766 811 856 901 946 991Number of Steps in TreeG. Barone-Adesi, N. Fusari, J. Theal <strong>Barrier</strong> <strong>Option</strong> <strong>Pricing</strong> <strong>Using</strong> <strong>Adjusted</strong> <strong>Transition</strong> <strong>Probabilities</strong>
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