Joint distribution of Brownian motion and its maximum, with a generalization to correlated BM and applications to barrier options
Consider Brownian motion Bt and its maximum Mt = max0 [less-than-or-equals, slant] s [less-than-or-equals, slant] t Bs. We derive the joint distribution of (Ms, Bt) for all s and make a generalization to correlated BM. These distributions are applied to price barrier options.
Year of publication: |
1996
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Authors: | Chuang, Chin-Shan |
Published in: |
Statistics & Probability Letters. - Elsevier, ISSN 0167-7152. - Vol. 28.1996, 1, p. 81-90
|
Publisher: |
Elsevier |
Keywords: | Brownian motion Correlated Brownian motion in the plane Maximum process Markov property Contingent claims Barrier options |
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