Valuing Double Barrier Options With Time-Dependent Parameters by Fourier Series Expansion
IAENG International Journal of Applied Mathematics, Vol. 36, No. 1, 2007
5 Pages Posted: 27 Aug 2007
Based upon the Fourier series expansion, we propose a simple and easy-to-use approach for computing accurate estimates of Black-Scholes double barrier option prices with time-dependent parameters. This new approach is also able to provide tight upper and lower bounds of the exact barrier option prices. Furthermore, this approach can be straightforwardly extended to the valuation of standard European options with specified moving boundaries as well.
Keywords: Double-barrier Options, Fourier Series, Moving Boundaries, Time-dependent Parameters
JEL Classification: C60, G13
Suggested Citation: Suggested Citation