Radial Barrier Options
N.P. Firth and J.N.
OCIAM, Mathematical Institute,
University of Oxford
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.
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