TITLE:
A Note on the Kou’s Continuity Correction Formula
AUTHORS:
Ting Liu, Chang Feng, Yanqiong Lu, Bei Yao
KEYWORDS:
B-S Model, Discrete Barrier Options, Hyper-Exponential Jump Diffusion, Continuity Correction Formula
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.3 No.11,
November
20,
2015
ABSTRACT: This article introduces a
hyper-exponential jump diffusion process based on the continuity correction for
discrete barrier options under the standard B-S model, using measure
transformation and stopping time theory to prove the correction, thus
broadening the conditions of the continuity correction of Kou.