SSE/EFI Working Paper Series in Economics and Finance
Stock Options as Barrier Contingent Claims
() and Joel Reneby
Abstract: This paper contributes in two ways. First it extends the
Geske (1979) compound option pricing model to the case where the underlying
call is a down-and-out claim. Second it provides an internally consistent
frame-work for valuing options on general corporate securities. Numerical
results suggest that the detailed characteristics of the underlying capital
structure (such as coupons, principal and maturities) may substantially
influence the pricing of options.
Keywords: Compound barrier contingent claims; option pricing; (follow links to similar papers)
JEL-Codes: G13; (follow links to similar papers)
38 pages, November 1996, Revised September 2002
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- This paper is published as:
Ericsson, Jan and Joel Reneby, (2003), 'Stock Options as Barrier Contingent Claims', Applied Mathematical Finance, pages 121-147
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