The Effect of Model Risk on the Valuation of Barrier Options
ALI HIRSA
(Firm risk management at Morgan Stanley in New York, NY. ali.hirsa@morganstanley.com)
GEORGES COURTADON
(Managing director and head of risk control at CDC IXIS Capital Markets North America. g.courtadon@cdcixis‐cmna.com)
DILIP B. MADAN
(Professor of finance at the Robert H. Smith School of Business, University of Maryland at College Park. dbm@rhsmith.umd.edu)
289
Abstract
The payoffs of exotic options (e.g., up‐and‐out call options) are dependent on the time‐path of asset prices rather than the price of the asset at a fixed point in time. The authors of this article compare various models for calibrating volatility surfaces in order to price up‐and‐out call options.
Citation
HIRSA, A., COURTADON, G. and MADAN, D.B. (2003), "The Effect of Model Risk on the Valuation of Barrier Options", Journal of Risk Finance, Vol. 4 No. 2, pp. 47-55. https://doi.org/10.1108/eb022961
Publisher
:MCB UP Ltd
Copyright © 2003, MCB UP Limited