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Decisions in Economics and Finance

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25-05-2019

Semi-analytical prices for lookback and barrier options under the Heston model

Authors: Luca De Gennaro Aquino, Carole Bernard

Published in: Decisions in Economics and Finance | Issue 2/2019

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Abstract

Under the Heston stochastic volatility model, we derive semi-analytical formulas for the prices of path-dependent options with payoffs linked to the maximum or minimum value of the underlying asset price over a certain period of time. In particular, we obtain prices of lookback and barrier options in the Heston model, but the methodology applies more generally. By conditioning with respect to the variance path, we obtain pricing formulas that can be related to their counterparts in the Black–Scholes model.

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Title: Semi-analytical prices for lookback and barrier options under the Heston model
Authors: Luca De Gennaro Aquino
Carole Bernard
Publication date: 25-05-2019
Publisher: Springer International Publishing
Published in: Decisions in Economics and Finance / Issue 2/2019
Print ISSN: 1593-8883
Electronic ISSN: 1129-6569
DOI: https://doi.org/10.1007/s10203-019-00254-x

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Semi-analytical prices for lookback and barrier options under the Heston model

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