NDLI: Sensitivity analysis for barrier options

Content Provider	IEEE Xplore Digital Library
Author	Yongqiang Wang Fu, M.C. Marcus, S.I.
Copyright Year	2009
Description	Author affiliation: Department of Electrical and Computer Engineering & Institute for Systems Research, University of Maryland College Park, MD, 20742, U.S.A (Yongqiang Wang; Marcus, S.I.) \|\| The Robert H. Smith School of Business & Institute for Systems Research, University of Maryland College Park, MD, 20742, U.S.A (Fu, M.C.)
Abstract	Barrier options are popular derivative securities with payoffs dependent on whether or not an underlying asset crosses a barrier. This paper presents a Monte Carlo simulation-based method of sensitivity analysis for barrier options based on smoothed perturbation analysis (SPA) for a general form of discontinuous sample function payoffs. The connection between the resulting SPA estimator and the probability formula derived in Hong (2008) and its generalization in Liu and Hong (2009) is explored. Using a Brownian bridge result, the estimator is applied to continuously-monitored barrier options with rebates. Illustrative simulation examples are provided.
Starting Page	1272
Ending Page	1282
File Size	435238
Page Count	11
File Format	PDF
ISBN	9781424457700
e-ISBN	9781424457717
DOI	10.1109/WSC.2009.5429560
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2009-12-13
Publisher Place	USA
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Sensitivity analysis Pricing Educational institutions Computational modeling Computer security Monte Carlo methods Analytical models Bridges Finance Stochastic processes
Content Type	Text
Resource Type	Article

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