| Article ID: | iaor20082103 |
| Country: | Japan |
| Volume: | 50 |
| Issue: | 2 |
| Start Page Number: | 137 |
| End Page Number: | 150 |
| Publication Date: | Jun 2007 |
| Journal: | Journal of the Operations Research Society of Japan |
| Authors: | Kijima Masaaki, Suzuki Teruyoshi |
| Keywords: | pricing |
This article considers the pricing of options with stochastic boundaries in a Gaussian economy. More specifically, prices of corporate discount bonds and knock-out exchange options are obtained in closed form. The key tools for doing this are the change of measure and the reflection principle of a driftless Gaussian process with a deterministic diffusion coefficient.