Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.jedc.2009.10.008
Title: A lattice algorithm for pricing moving average barrier options
Authors: Dai, M. 
Li, P.
Zhang, J.E.
Keywords: Barrier option
Extrapolation
Forward shooting grid method
Lattice algorithm
Moving average
Issue Date: Mar-2010
Citation: Dai, M., Li, P., Zhang, J.E. (2010-03). A lattice algorithm for pricing moving average barrier options. Journal of Economic Dynamics and Control 34 (3) : 542-554. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jedc.2009.10.008
Abstract: This paper presents a lattice algorithm for pricing both European- and American-style moving average barrier options (MABOs). We develop a finite-dimensional partial differential equation (PDE) model for discretely monitored MABOs and solve it numerically by using a forward shooting grid method. The modeling PDE for continuously monitored MABOs has infinite dimensions and cannot be solved directly by any existing numerical method. We find their approximate values indirectly by using an extrapolation technique with the prices of discretely monitored MABOs. Numerical experiments show that our algorithm is very efficient. © 2009 Elsevier B.V. All rights reserved.
Source Title: Journal of Economic Dynamics and Control
URI: http://scholarbank.nus.edu.sg/handle/10635/102667
ISSN: 01651889
DOI: 10.1016/j.jedc.2009.10.008
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