Switched Knockout Options:Numerical Valuation

概要

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In modern financial markets, various option contracts have been introduced and traded. Knockout options are kinds of exotic contingent claims whose right to exercise is nullified when the underlying asset price hits a knockout boundary. Beginning with a mathematical model of Merton in 1973, some extended models have been developed for the knockout options, under a common assumption that the knockout boundary exists in the whole trading interval. In this paper, however, we consider a new European knockout option whose knockout boundary exists only in a certain part of the trading interval, so that we call it a switched knockout option. Extensive numerical experiments show that the switched knockout options have quite different properties from the ordinary knockout as well as vanilla options, especially on the sensitivity with volatility.
北海道大学の論文