Pricing European Barrier Options


Peter W. Buchen


Research Report 96-25
Date: 13 June 1996


A new method is described to price barrier options which incorporate a constant rebate. The method exploits the symmetries and properties of elementary solutions of the Black-Scholes partial differential equation. The rebate and non-rebate terms obtained agree with other published solutions, but are obtained without recourse to a single transformation or integration. The complexity of the solution methods previously published are shown to be completely unnecessary.

Key phrases

option pricing, financial mathematics.


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