Acta mathematica scientia,Series A ›› 2013, Vol. 33 ›› Issue (5): 912-925.

• Articles • Previous Articles     Next Articles

Barrier Options Pricing when Parameters Dependent on Stock Price

 SUN Yu-Dong, SHI Xi-Min, WU Min   

  1. Department of Applied Mathematics, Northwestern Polytechnical University, Xi'an 710072
  • Received:2012-03-19 Revised:2013-05-13 Online:2013-10-25 Published:2013-10-25
  • Supported by:

    国家自然科学基金(70471057, 71171164)、西北工业大学博士论文创新基金(CX201235)和西北工业大学研究生种子基金(Z2011073)资助.

Abstract:

Previous option pricing research typically assumes that the stock volatility is constant during the life of the option. In this study, we assume the stock volatility in our option valuation model is function of stock. By approximate method, the partial differential equation satisfied the down-and-out option and up-and-out option are changed to another partial 
differential equation which can be solved. Finally, the pricing formula for down-and-out option and up-and-out option are obtained. In order to the mathematically rigorous, we supply the error estimation.

Key words: Brownian motion, Option pricing, Modified Black-Scholes model, Barriar option

CLC Number: 

  • 35A09
Trendmd