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VALUATION OF BARRIER OPTIONS VIA A GENERAL SELF‐DUALITY
Author(s) -
Alòs Elisa,
Chen Zhanyu,
Rheinländer Thorsten
Publication year - 2016
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/mafi.12063
Subject(s) - valuation (finance) , duality (order theory) , exotic option , mathematical economics , economics , barrier option , volatility (finance) , dual (grammatical number) , path dependent , econometrics , mathematics , valuation of options , pure mathematics , finance , art , literature
Classical put–call symmetry relates the price of puts and calls under a suitable dual market transform. One well‐known application is the semistatic hedging of path‐dependent barrier options with European options. This, however, in its classical form requires the price process to observe rather stringent and unrealistic symmetry properties. In this paper, we develop a general self‐duality theorem to develop valuation schemes for barrier options in stochastic volatility models with correlation.