Accurate Pricing of Continuous Barrier Options with Local Volatility

2011 ◽  
Author(s):  
Messaoud Chibane
Keyword(s):  
Barrier Options ◽  
Local Volatility

Analytical pricing of single barrier options under local volatility models

2015 ◽  
Vol 16 (6) ◽  
pp. 867-886 ◽  
Author(s):  
Hideharu Funahashi ◽  
Masaaki Kijima
Keyword(s):  
Barrier Options ◽  
Local Volatility ◽  
Volatility Models

Accurate Pricing of Continuous Barrier Options With Local Volatility

Wilmott ◽  
2012 ◽  
Vol 2012 (62) ◽  
pp. 74-81
Author(s):  
Messaoud Chibane ◽  
Hong Miao ◽  
Guy Sheldon
Keyword(s):  
Barrier Options ◽  
Local Volatility

scholarly journals THE TIME-DEPENDENT FX-SABR MODEL: EFFICIENT CALIBRATION BASED ON EFFECTIVE PARAMETERS

2015 ◽  
Vol 18 (06) ◽  
pp. 1550042 ◽  
Author(s):  
ANTHONIE W. VAN DER STOEP ◽  
LECH A. GRZELAK ◽  
CORNELIS W. OOSTERLEE
Keyword(s):  
Monte Carlo ◽  
Time Dependent ◽  
Barrier Options ◽  
Constant Parameter ◽  
Effective Parameters ◽  
Local Volatility ◽  
Local Volatility Model ◽  
Volatility Model ◽  
Sabr Model

We present a framework for efficient calibration of the time-dependent SABR model (Fernández et al. (2013) Mathematics and Computers in Simulation94, 55–75; Hagan et al. (2002) Wilmott Magazine 84–108; Osajima (2007) Available at SSRN 965265.) in an foreign exchange (FX) context. In a similar fashion as in (Piterbarg (2005) Risk18 (5), 71–75) we derive effective parameters, which yield an accurate and efficient calibration. On top of the calibrated FX-SABR model, we add a non-parametric local volatility component, which naturally compensates for possible calibration errors. By means of Monte Carlo pricing experiments, we show that the time-dependent FX-SABR model enables an accurate and consistent pricing of barrier options and outperforms the constant-parameter SABR model and the traditional local volatility model (Derman & Kani (1998) International Journal of Theoretical and Applied Finance1 (1), 61–110; Dupire (1994) Risk7 (1), 18–20). We also discuss the role of the local volatility component in pricing barrier options.

Discrete Asian barrier options

1999 ◽  
Vol 3 (1) ◽  
pp. 41-67 ◽  
Author(s):  
R Zvan ◽  
P Forsyth ◽  
K Vetzal
Keyword(s):  
Barrier Options
Sign in / Sign up

Export Citation Format

Share Document