VALUATION OF DISCRETELY MONITORED FINANCIAL DERIVATIVES BY A PROBABILISTIC APPROACH

  • Mariyan Milev
Keywords: financial derivatives, discrete monitoring, pricing barrier options, time-dependent parameters, Mellin transforms, the Black-Scholes model

Abstract

In this paper the Mellin transform classical approach is explored in a new semi-analytical modified form using a new probabilistic technique for pricing financial derivatives by solving the Black-Scholes equation with time-dependent parameters. We apply an alternative numerical Maximum entropy technique for inversion and accurate valuation is guaranteed by some results for probability distributions of fractional moments previously obtained in [14], [20]. Pricing discretely monitored financial derivatives is demonstrated by examples involving barrier options.

References

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http://www.sciencedirect.com/science/article/pii/S0377042712004128
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Published
2023-02-01
How to Cite
Milev, M. (2023). VALUATION OF DISCRETELY MONITORED FINANCIAL DERIVATIVES BY A PROBABILISTIC APPROACH. Vanguard Scientific Instruments in Management, 10(10). Retrieved from https://www.vsim-journal.info/index.php?journal=vsim&page=article&op=view&path[]=323