The authors thank the associate editor and referees for helpful comments. This research has been supported by MITACS and NSERC.
PRICING CHAINED OPTIONS WITH CURVED BARRIERS
Article first published online: 13 FEB 2012
© 2012 Wiley Periodicals, Inc.
Volume 23, Issue 4, pages 763–776, October 2013
How to Cite
Jun, D. and Ku, H. (2013), PRICING CHAINED OPTIONS WITH CURVED BARRIERS. Mathematical Finance, 23: 763–776. doi: 10.1111/j.1467-9965.2011.00513.x
- Issue published online: 5 AUG 2013
- Article first published online: 13 FEB 2012
- Manuscript received March 2011; final revision received July 2011.
- chained option;
- exponential barrier;
- curved barrier
This paper studies barrier options which are chained together, each with payoff contingent on curved barriers. When the underlying asset price hits a primary curved barrier, a secondary barrier option is given to a primary barrier option holder. Then if the asset price hits another curved barrier, a third barrier option is given, and so on. We provide explicit price formulas for these options when two or more barrier options with exponential barriers are chained together. We then extend the results to the options with general curved barriers.