Korean J. Math.  Vol 25, No 2 (2017)  pp.229-246
DOI: http://dx.doi.org/10.11568/kjm.2017.25.2.229

Analytic solutions for American partial barrier options by exponential barriers

Chulhan Bae, Doobae Jun

Abstract


This paper concerns barrier option of American type where the underlying price is monitored during only part of the option's life. Analytic valuation formulas of the American partial barrier options are obtained by approximation method. This approximation method is based on barrier options along with exponential early exercise policies. This result is an extension of Jun and [10] where the exercise policies are constant.

Keywords


American option; partial barrier option; exponential barrier

Subject classification

65C50; 62P20

Sponsor(s)

NRF of Korea

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