2009Yunnan Daxue xuebao. Shehui kexue banRequires access

Pricing of European up-and-inoption based on jump-diffusion model

Sun Cheng-tong

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Abstract

Barrier options is path-dependent option,so its price is difficult to calculate.Under the assumption that underlying asset price follows Poisson jump-diffusion,the pricing formula of European up-and-in put option and European up-and-in call option on jump-diffusion model are deduced,using the risk neutral pricing principle and Girsanov theorem.

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What this paper is about

Barrier options is path-dependent option,so its price is difficult to calculate.Under the assumption that underlying asset price follows Poisson jump-diffusion,the pricing formula of European up-and-in put option and European up-and-in call option on jump-diffusion model are deduced,using the risk neutral pricing principle and Girsanov theorem.

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Available abstract

Barrier options is path-dependent option,so its price is difficult to calculate.Under the assumption that underlying asset price follows Poisson jump-diffusion,the pricing formula of European up-and-in put option and European up-and-in call option on jump-diffusion model are deduced,using the risk neutral pricing principle and Girsanov theorem.

Key concepts: Girsanov theorem, Jump diffusion, Jump, Diffusion, Poisson distribution, Call option, Valuation of options, Trinomial tree

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