Double Barrier Option Pricing Formulas of an Uncertain Stock Model

Articles in Press

Document Type : Research Article

Authors

Department of Mathematics, Faculty of Mathematics, Statistics and Computer Sciences, Semnan University, P.O. Box 35195-363, Semnan, Iran.

Abstract

The valuation of options is an essential topic in the financial markets, and barrier options represent a widely utilized category of options that may gain or lose value once the price of the underlying asset hits a specified threshold. 
A double barrier option includes two barriers, one above and one below the current stock price. It is classified as path dependent due to the fact that the holder's return is influenced by the stock price's breach of these barriers. The double barrier option contract defines three specific payoffs, which are contingent upon whether the upper barrier or lower barrier is breached, or if there is no breach of either barrier throughout the option's duration. In this paper, pricing of the double barrier options when the underlying asset price follows the uncertain stock model is investigated, and also pricing formulas for different types of double barrier options (knock-in and knock-out) are derived by $ \alpha $-paths of uncertain differential equations in the uncertain environment.

Keywords

References

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Analytical and Numerical Solutions for Nonlinear Equations

Articles in Press, Accepted Manuscript
Available Online from 05 March 2025

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History

  • Receive Date: 11 February 2025
  • Revise Date: 26 February 2025
  • Accept Date: 05 March 2025
  • Publish Date: 05 March 2025

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