Barrier Options Under Negative Rates in Black-Scholes

4 Pages Posted: 27 Sep 2014 Last revised: 18 Jun 2015

Fabien Le Floc'h

Calypso Technology; Independent

Alexander Prüll

Erste Group Bank AG

Date Written: September 26, 2014

Abstract

Under negative interest rates, the Black-Scholes formula for barrier options with rebate appears to breakdown. This note shows how one can just use complex numbers to overcome the problem.

Keywords: barrier option, Black-Scholes, finance

Suggested Citation

Le Floc'h, Fabien and Prüll, Alexander, Barrier Options Under Negative Rates in Black-Scholes (September 26, 2014). Available at SSRN: https://ssrn.com/abstract=2501907 or http://dx.doi.org/10.2139/ssrn.2501907

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

Alexander Prüll

Erste Group Bank AG ( email )

Am Belvedere 1
Vienna, 1100
Austria

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