Consider a discretely monitored down-and-out call option with strike price X and barrier level B i at

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Consider a discretely monitored down-and-out call option with strike price X and barrier level B_i at discrete time ti,i = 1, 2, ··· ,n. Show that the price of this European barrier call option is given by (Heynen and Kat, 1996)

Cdo (So, T; X, B, B2,... , Bn) = So Nn+1(d, d,..., dn+; I) - e-Ti -rT N+1(d, d, ..., d+; r), where

In+(+) o ti d=d - 0, i = 1, 2, ..., n, In +(+)T dn+ = d+-oT. ONT Also, I is the (n + 1) (n + 1) correlation

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Mathematical Models Of Financial Derivative

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Authors: Yue-Kuen Kwok

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Question Posted: Dec 05, 2023 01:13 AM

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Consider a discretely monitored down-and-out call option with strike price X and barrier level B i at

Question:

Cdo (So, T; X, B₁, B2, ..., Bn) = So Nn+1(d, d, ..., d+¹; I) - e-Ti -rT N₂+1(d₂, d², ..., d₂+¹; I),

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To show that the price of the European barrier call option is given by the provided expression we ca...View the full answer

Mathematical Models Of Financial Derivative

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