Duan, Jin-Chuan; Dudley, Evan; Gauthier, Geneviève; … - Centre Interuniversitaire de Recherche en Analyse des … - 1999
We propose a Markov chain method for pricing discretely monitored barrier options in both the constant and time-varying volatility valuation frameworks. The method uses a time homogeneous Markov Chain to approximate the underlying asset price process. Our approach provides a natural framework...