Abstract.
This paper considers the problem of pricing discrete barrier options. A discrete barrier option is a barrier option where the barrier is monitored only at specific dates. This paper continues the work initiated by Broadie et al. in [B-G-K] and determine formulas to estimate the price of discrete up-and-out/in calls, down-and-out/in puts and double barrier options. Numerical examples presented in this paper show that the formulas yield good results.
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Manuscript received: February 2001; final version received: April 2002
The author would like to thank Christer Borell, Chalmers University of Technology, and Anna Areskoug and Hakan Norekrans, Front Capital Systems AB, for their comments and suggestions.
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Hörfelt, P. Extension of the corrected barrier approximation by Broadie, Glasserman, and Kou. Finance Stochast 7, 231–243 (2003). https://doi.org/10.1007/s007800200077
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DOI: https://doi.org/10.1007/s007800200077