Journal of Computational Finance
ISSN:
1460-1559 (print)
1755-2850 (online)
Editor-in-chief: Christoph Reisinger
Valuing moving barrier options
L. C. G. Rogers, O. Zane
Abstract
ABSTRACT
The authors show how to compute prices of options knocked out when the underlying price crosses smoothly-moving barriers. The method is to reduce the problem to fixed barriers, by transformation of the state space, and then to change time so as to make the underlying diffusion into a Brownian motion with time-dependent drift.
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