With traditional barrier options, life and death of the option are determined by the same reference index as the index underlying the original option contract. It is, however, also possible to structure options where a second reference index determines whether the option knocks in or out. In...

Lookback options provide investors with perfect market timing services. However, these options are hardly ever traded because they are much more expensive than ordinary options. The problem with standard lookbacks is that they provide the investor with much more timing than typically required....

In this article we study the pricing and hedging of options whose payoff is a polynomial function of the underlying reference index at expiration; so-called power options. Working in the Black-Scholes (1973) framework, we derive closed-form formulas for the prices of general power calls and...

Barrier options come in many forms. In this article we study the pricing of discrete partial barrier options where the barrier level may change deterministically during the monitoring period and monitoring takes place at not-necessarily equally spaced points in time. We provide closed-form...

Future volatility is a key input for pricing and hedging derivatives and for quantitative investment strategies in general. There are many different approaches. This article investigates whether random walk, GARCH (1,1), EGARCH (1,1) and stochastic volatility models of return volatility behavior...

In this paper we study the pricing of barrier options where the period during which the underlying price is monitored for barrier hits is restricted to only part of the options' lifetime. We derive closed-form formulas for the prices of a number of partial barrier options, including partial...

Digitals are contracts that pay a fixed amount of money if at maturity the reference index is above (for a call) or below (for a put) some specific value. One can easily extend this conceptto a bivariate setting and create a contract that pays a fixed amount if both reference indices are above...