High Dimensional Radial Barrier Options
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Abstract
Pricing high dimensional American options is a difficult problem in mathematical finance. Many simulation methods have been proposed, but Monte Carlo is numerically intensive, and therefore slow. We derive an analytic expression for a new type of multi-asset barrier option using Laplace transform methods. The solution is assumed to be radially symmetric in the normalized non dimensional variables, hence the name `Radial Barrier Options'. In the single-asset case our results reduce to published results for American binary barrier options.