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Application Of The Kusuoka Approximation To Barrier Options

Author

Listed:
  • Shigeto Kusuoka

    (Graduate School of Mathematical Sciences, The University of Tokyo)

  • Mariko Ninomiya

    (Graduate School of Economics, University of Tokyo)

  • Syoiti Ninomiya

    (Center for Research in Advanced Financial Technology, Tokyo Institute of Technology)

Abstract

The authors focuses on numerical experiments of application of the Kusuoka approximation to pricing barrier options which is one of the problems with a boundary condition. The killing functions play a role of giving probability of hitting the boundary. The numerical experiments show that second-order approximation is achieved as done in pricing European style options ([3][4]).

Suggested Citation

  • Shigeto Kusuoka & Mariko Ninomiya & Syoiti Ninomiya, 2012. "Application Of The Kusuoka Approximation To Barrier Options," CARF F-Series CARF-F-277, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf277
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/289.pdf
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    References listed on IDEAS

    as
    1. Syoiti Ninomiya & Nicolas Victoir, 2008. "Weak Approximation of Stochastic Differential Equations and Application to Derivative Pricing," Applied Mathematical Finance, Taylor & Francis Journals, vol. 15(2), pages 107-121.
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    Cited by:

    1. Kensuke Ishitani, 2016. "Computation of first-order Greeks for barrier options using chain rules for Wiener path integrals," Papers 1611.05194, arXiv.org, revised Dec 2016.

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