Journal of Computational Finance
ISSN:
1460-1559 (print)
1755-2850 (online)
Editor-in-chief: Christoph Reisinger
Pricing moving average barrier options
J. P. Heritage
Abstract
ABSTRACT
A moving average up-and-out call option differs from an up-and-out call option in that knock-out occurs when a moving average price process reaches the barrier. This paper considers two such options that differ in the precise conditions for knock-out. In the Black–Scholes model, approximate prices are obtained for these options in terms of the prices of up-and-out call options. The price obtained for one of the options is compared with prices obtained by simulation.
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