Pricing discretely sampled path-dependent exotic options using replication methods
by Dr Mark S Joshi
Abstract: A semi-static replication method is introduced for pricing discretely sampled path-dependent options. It depends upon buying and selling options at the reset times of the option but does not involve trading at intervening times.
The method is model independent in that it only depends upon the existence of a pricing function for vanilla call options which depends purely on current time, time to expiry, spot and strike.
For the special case of a discrete barrier, an alternative method is developed which involves trading only at the initial time and the knockout time or expiry of the option.
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