A Note on a Barrier Exchange Option: The World's Simplest Option Formula?

Posted: 19 Mar 2007

See all articles by Snorre Lindset

Snorre Lindset

Norwegian University of Science and Technology (NTNU)

Svein-Arne Persson

Norwegian School of Economics (NHH)

Abstract

The paper analyzes a barrier exchange option that is knocked out the first time the two underlying assets have identical market values. Under rather general conditions regarding the price processes for the underlying assets, probably the world's simplest option pricing formula is derived. It applies both to options of American and European type.

Suggested Citation

Lindset, Snorre and Persson, Svein-Arne, A Note on a Barrier Exchange Option: The World's Simplest Option Formula?. Finance Research Letters, Vol. 3, No. 3, pp. 207-211, 2006; NHH Dept. of Finance & Management Science Discussion Paper No. 2005/5. Available at SSRN: https://ssrn.com/abstract=970177

Snorre Lindset

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway
+4773591395 (Phone)

Svein-Arne Persson (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
47-55-95-90-00 (Phone)
47-55-95-96-47 (Fax)

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