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High Dimensional Radial Barrier Options

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  • N.P. Firth
  • J.N. Dewynne

Abstract

Pricing high dimensional American options is a difficult problem in mathematical finance. Many simulation methods have been proposed, but Monte Carlo is numerically intensive, and therefore slow. We derive an analytic expression for a new type of multi-asset barrier option using Laplace transform methods. The solution is assumed to be radially symmetric in the normalized non dimensional variables, hence the name `Radial Barrier Options'. In the single-asset case our results reduce to published results for American binary barrier options.

Suggested Citation

  • N.P. Firth & J.N. Dewynne, 2004. "High Dimensional Radial Barrier Options," OFRC Working Papers Series 2004mf02, Oxford Financial Research Centre.
    • Handle: RePEc:sbs:wpsefe:2004mf02
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2004mf02.pdf
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    Cited by:

    1. C. Atkinson & S. Kazantzaki, 2009. "Double knock-out Asian barrier options which widen or contract as they approach maturity," Quantitative Finance, Taylor & Francis Journals, vol. 9(3), pages 329-340.

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