Pricing double-barrier options under a flexible jump diffusion model

In this paper we present a Laplace transform-based analytical solution for pricing double-barrier options under a flexible hyper-exponential jump diffusion model (HEM). The major theoretical contribution is that we prove non-singularity of a related high-dimensional matrix, which guarantees the exis...

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Bibliographic Details
Published in:Operations research letters Vol. 37; no. 3; pp. 163 - 167
Main Authors: Cai, Ning, Chen, Nan, Wan, Xiangwei
Format: Journal Article
Language:English
Published: Oxford Elsevier B.V 01.05.2009
Elsevier
Subjects:
Applied sciences
Double-barrier options
Euler inversion algorithm
Exact sciences and technology
First passage times
Hyper-exponential distribution
Jump diffusion
Operational research and scientific management
Operational research. Management science
Portfolio theory
Euler inversion algorithm
First passage times
Hyper-exponential distribution
Double-barrier options
Jump diffusion
Solution uniqueness
Euler equation
Singularity
Exponential distribution
Inversion
Modeling
Uniqueness theorem
Stock exchange
Diffusion process
First passage time
Jump process
Laplace transformation
Financial option
Tariffication
Analytical solution
ISSN:0167-6377, 1872-7468
Online Access:Get full text
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Summary:In this paper we present a Laplace transform-based analytical solution for pricing double-barrier options under a flexible hyper-exponential jump diffusion model (HEM). The major theoretical contribution is that we prove non-singularity of a related high-dimensional matrix, which guarantees the existence and uniqueness of the solution.
ISSN:0167-6377
1872-7468
DOI:10.1016/j.orl.2009.02.006