Abstract
Barrier options are subject to intensive research. Merton (1973) was the first who derived a closed-form solution for the down-and-out call with constant barrier. Further references are Cox/Rubinstein (1985), Rubinstein/Reiner (1991), and Carr (1995). For options with lower and upper barriers closed-form solutions are not available, but option prices can be represented by infinite series. This was shown by Kunitomo/Ikeda (1992) in the more general case of deterministic exponential boundaries. More recently, Rogers/Zane (1997), Novikov/Frishling/Kordzakhia (1999), and Kolkiewicz (2002) considered related problems by different methods. All authors assumed deterministic interest rates.
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© 2004 Springer-Verlag Berlin Heidelberg
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Kraft, H. (2004). Barrier Derivatives with Curved Boundaries. In: Optimal Portfolios with Stochastic Interest Rates and Defaultable Assets. Lecture Notes in Economics and Mathematical Systems, vol 540. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17041-6_4
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DOI: https://doi.org/10.1007/978-3-642-17041-6_4
Publisher Name: Springer, Berlin, Heidelberg
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