On Pricing Barrier Options
(This project is taken by Murielle Ange Tiambo for Spring Semester 2008-2009)
Description:
Barrier options will be studied, as well as hitting times of the geometric Brownian motion. The study will focus on European single barrier options, in particular the pricing and the hedging of continuous barrier options and discrete barrier options. Approximation methods for discrete barriers will be studied. The performance of the methods will be evaluated on both simulated and real data.
Prerequisites:
The student should be at ease with probability, stochastic calculus and Matlab programming.
References:
[1] J. C. Hull, Options, Futures, and other Derivative Securities, 4th edition. Prentice Hall, New Jersey.
[2] P. Carr, A. Chou, Breaking Barriers, Risk magazine 10, 139-144, 1997.
[3] S. Kou, On Pricing of Discrete Barrier Options, Statistica Sinica 13, Columbia University, NY, 2003.
[4] P. Hörfelt, Extension of the Corrected Barrier Approximation by Broadie, Glasserman and Kou, Finance and Stochastics 7, 231-243, 2003.
Supervisor:
Dr. Olivier Lévêque (LTHI) * Email: olivier.leveque#epfl.ch * Office: INR 132 * Tel: 38112