Analytical valuation of exotic double barrier options

Jui Jane Chang, Hui Ming Pai, Ting Pin Wu

Research output: Contribution to journalArticlepeer-review


This article derives the bivariate joint probability distribution functions of a geometric Brownian motion and the extreme values of another geometric Brownian. Based on the probability distribution functions, the authors develop the analytical pricing formulas of three exotic double barrier options (DBOs) with continuously monitored barriers, including rainbow DBOs, protected DBOs, and protected rainbow DBOs. By using the continuity correction of barriers proposed in research by Doobae Jun, the aforementioned pricing formulas can be further extended to price the three exotic DBOs with discretely monitored barriers. Some numerical examples are also provided for end-users to examine the pricing accuracy and efficiency and the properties of the exotic DBOs.

Original languageEnglish
Pages (from-to)97-122
Number of pages26
JournalJournal of Derivatives
Issue number3
StatePublished - Mar 2021


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