65th ISI World Statistics Congress

65th ISI World Statistics Congress

Piecewise linear barrier probability and option pricing

Conference

65th ISI World Statistics Congress

Format: IPS Abstract - WSC 2025

Keywords: finance, mathematical

Session: IPS 1099 - Statistical inference on various data structure

Monday 6 October 9:20 a.m. - 10:30 a.m. (Europe/Amsterdam)

Abstract

This paper derives piecewise linear barrier probabilities and provides their pricing formulas. To this end, we establish the analytical piecewise linear probability and explain how to approximate arbitrary boundary crossing probabilities. In addition, we show numerical examples of barrier options . We consider more general formula with arbitrary payoffs so called static hedging lemma. Extensive numerical experiments validate theoretical findings.