Recalculate Table 4.2 for barrier options assuming prices follow a jump diffusion model with normal sized jumps.

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Recalculate Table 4.2 for barrier options assuming prices follow a jump diffusion model with normal sized jumps. Recall that the simulation must go event by-event.

Data given in table 4.2

Table 4.2 So= 100, K = 100, rf = 3% Barrier versus European option prices Type Barrier Expiry(days) Call 95

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Finance With Monte Carlo

ISBN: 9781461485100

2013th Edition

Authors: Ronald W. Shonkwiler

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Question Posted: Oct 03, 2023 06:20 AM

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Recalculate Table 4.2 for barrier options assuming prices follow a jump diffusion model with normal sized jumps.

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Table 4.2 So = 100, K = 100, rf = 3% Barrier versus European option prices Type Barrier Expiry (days) Call 95 Call 95 Call 95 Call 90 Put 105 60 60 90 60 60 Vol. (%) At(days) Barrier price 0.05 0.005 0.005 0.05 0.05 20 40 20 20 20 3.09 4.04 3.53 3.48 2.57 European 3.48 6.70 3.32 3.48 2.99

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