The binomial interpolated lattice method fro step double barrier options

We consider the problem of pricing step double barrier options with binomial lattice methods. We introduce an algorithm, based on interpolation techniques, that is robust and efficient, that treats the "near barrier" problem for double barrier options and per-mits the valuation of step dou...

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Bibliographic Details
Published in:International journal of theoretical and applied finance 2014, Vol.17 (6)
Main Authors: Appolloni, Elisa, Marcellino, Gaudenzi, Zanette, Antonino
Format: Article
Language:English
Subjects:
Mathematics
Probability
Online Access:Get full text
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Summary:We consider the problem of pricing step double barrier options with binomial lattice methods. We introduce an algorithm, based on interpolation techniques, that is robust and efficient, that treats the "near barrier" problem for double barrier options and per-mits the valuation of step double barrier options with American features. We provide a complete convergence analysis of the proposed lattice algorithm in the European case.
ISSN:0219-0249
0219-0249
DOI:10.1142/S0219024914500356