Valuation of Barrier Options via a General Self‐Duality
24 Pages Posted: 10 Jun 2016
Date Written: July 2016
Abstract
Classical put-call symmetry relates the price of puts and calls under a suitable dual market transform. One well‐known application is the semistatic hedging of path-dependent barrier options with European options. This, however, in its classical form requires the price process to observe rather stringent and unrealistic symmetry properties. In this paper, we develop a general self-duality theorem to develop valuation schemes for barrier options in stochastic volatility models with correlation.
Keywords: put–call symmetry, self‐duality, barrier options, stochastic volatility models, Malliavin calculus
Suggested Citation: Suggested Citation
Alos, Elisa and Chen, Zhanyu and Rheinlaender, Thorsten, Valuation of Barrier Options via a General Self‐Duality (July 2016). Mathematical Finance, Vol. 26, Issue 3, pp. 492-515, 2016, Available at SSRN: https://ssrn.com/abstract=2793591 or http://dx.doi.org/10.1111/mafi.12063
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