Pricing of barrier options by marginal functional quantization

Abass Sagna (1)

1 LAP - Laboratoire Analyse et Probabilités

This paper is devoted to the pricing of Barrier options by optimal quadratic quantization method. From a known useful representation of the premium of barrier options one deduces an algorithm similar to one used to estimate nonlinear filter using quadratic optimal functional quantization. Some numerical tests are fulfilled in the Black-Scholes model and in a local volatility model and a comparison to the so called Brownian Bridge method is also done.

Mots clés: Functional quantization; Barrier options; Regular Brownian Bridge method; local volatility model

Domaines: Probabilités [math.PR]

Abass Sagna. Pricing of barrier options by marginal functional quantization. Monte Carlo Methods and Applications, 2012, 17 (4), pp.371-398. ⟨hal-00543028⟩