Barrier Put-Call Transformations

TFE Number 3/97

9 Pages Posted: 25 Feb 1999

See all articles by Espen Gaarder Haug

Espen Gaarder Haug

Norwegian University of Life Sciences (NMBU)

Date Written: February 16, 1999

Abstract

In this article we show a simple but important relationship between the put-call transformation and the put-call symmetry as well as extend the relationship to also hold for single and double barrier options. These new barrier transformations give new insight in barrier option valuation. Using the transformation it is possible to value a barrier put option from a barrier call option formula and vice versa. Our results also extend the possibilities for static hedging and closed form valuation for many new exotic options. The new relationships also make us able to value a double barrier option in a simple and intuitive way, only using a few single barrier options.

JEL Classification: G13

Suggested Citation

Haug, Espen Gaarder, Barrier Put-Call Transformations (February 16, 1999). TFE Number 3/97. Available at SSRN: https://ssrn.com/abstract=150156 or http://dx.doi.org/10.2139/ssrn.150156

Espen Gaarder Haug (Contact Author)

Norwegian University of Life Sciences (NMBU) ( email )

As
As
Oslo, Norway, 1432
Norway

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