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http://dx.doi.org/10.4134/CKMS.c170060

DISCOUNT BARRIER OPTION PRICING WITH A STOCHASTIC INTEREST RATE: MELLIN TRANSFORM TECHNIQUES AND METHOD OF IMAGES  

Jeon, Junkee (Department of Mathematical Sciences Seoul National University)
Yoon, Ji-Hun (Department of Mathematics Pusan National University)
Publication Information
Communications of the Korean Mathematical Society / v.33, no.1, 2018 , pp. 345-360 More about this Journal
Abstract
In finance, barrier options are options contracts with a payoff that depends on whether the price of the underlying asset hits a predetermined barrier level during the option's lifetime. Based on exotic options and random fluctuations of interest rates in the marketplace, we consider discount barrier options with a stochastic interest rate driven by the Hull-White process. This paper derives the closed-form solutions of the discount barrier option and the discount double barrier option using Mellin transform methods and the PDE (partial differential equation) method of images.
Keywords
discount barrier options; discount double barrier options; Mellin transform; method of images;
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Times Cited By KSCI : 1  (Citation Analysis)
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