Valuation of Barrier Options via a General Self‐Duality

24 Pages Posted: 10 Jun 2016

See all articles by Elisa Alos

Elisa Alos

University of Pompeu Fabra - Department of Economics

Zhanyu Chen

London School of Economics & Political Science (LSE)

Thorsten Rheinlaender

Vienna University of Technology

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

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

Elisa Alos (Contact Author)

University of Pompeu Fabra - Department of Economics ( email )

c/o Ramon Trias Fargas 25-27
08005 Barcelona
Spain
34 93 542 19 25 (Phone)
34 93 542 17 46 (Fax)

Zhanyu Chen

London School of Economics & Political Science (LSE)

Houghton Street
London, WC2A 2AE
United Kingdom

Thorsten Rheinlaender

Vienna University of Technology ( email )

Vienna
Austria

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