Pricing double-barrier options under a flexible jump diffusion model

Authors:
Ning Cai;Nan Chen;Xiangwei Wan
Affiliations:
Department of Industrial Engineering and Logistics Management, The Hong Kong University of Science and Technology, Hong Kong;Department of System Engineering and Engineering Management, The Chinese University of Hong Kong, Hong Kong;Department of System Engineering and Engineering Management, The Chinese University of Hong Kong, Hong Kong
Venue:
Operations Research Letters
Year:
2009

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Abstract

In this paper we present a Laplace transform-based analytical solution for pricing double-barrier options under a flexible hyper-exponential jump diffusion model (HEM). The major theoretical contribution is that we prove non-singularity of a related high-dimensional matrix, which guarantees the existence and uniqueness of the solution.