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Vanna-Volga pricing for single and double barrier FX options

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  • J. Mart'in Ovejero

Abstract

In this paper, we provide a unified treatment of the Vanna-Volga pricing technique. We derive the value of single and double barriers FX options, as well as closed formulas for the Delta, Vega, Vanna and Volga of those contracts.

Suggested Citation

  • J. Mart'in Ovejero, 2022. "Vanna-Volga pricing for single and double barrier FX options," Papers 2211.12652, arXiv.org, revised Nov 2022.
    • Handle: RePEc:arx:papers:2211.12652
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    2. Frédéric Bossens & Grégory Rayée & Nikos S. Skantzos & Griselda Deelstra, 2010. "Vanna-Volga Methods Applied To Fx Derivatives: From Theory To Market Practice," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 13(08), pages 1293-1324.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    4. Garman, Mark B. & Kohlhagen, Steven W., 1983. "Foreign currency option values," Journal of International Money and Finance, Elsevier, vol. 2(3), pages 231-237, December.
    5. Naoto Kunitomo & Masayuki Ikeda, 1992. "Pricing Options With Curved Boundaries1," Mathematical Finance, Wiley Blackwell, vol. 2(4), pages 275-298, October.
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