CAUCHY: Jurnal Matematika Murni dan Aplikasi
Vol 10, No 2 (2025): CAUCHY: JURNAL MATEMATIKA MURNI DAN APLIKASI

Pricing Modified Barrier Options Using the Bino-Trinomial Tree Model: A Strategy for Loss Minimization

Rahayu, Rima Aulia (Unknown)
Agustina, Fitriani (Unknown)
Sidarto, Kuntjoro Adji (Unknown)



Article Info

Publish Date
22 Jun 2025

Abstract

A particular exotic option that is widely traded in the global financial market is the barrier option. Barrier options are attractive because they have a limit that must be reached to activate the option. These limits may be utilized by investors as a point of reference to minimize potential losses. Accordingly, the researcher attempts to use the bino-trinomial tree model as a new approach to minimize losses. The purpose of this study is to analyze the bino-trinomial tree model to provide investors with more flexible hedging experience. The bino-trinomial tree model is obtained by combining the trinomial tree model at the first stage, then the binomial tree model at a further stage. This analysis was conducted by calculating the type of knock-out european call options. The results demonstrate that this model can effectively, accurately and flexibly manage the complex options required by modern investors, including multi-step single moving barrier options and single window barrier options.

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Journal Info

Abbrev

Math

Publisher

Subject

Mathematics

Description

Jurnal CAUCHY secara berkala terbit dua (2) kali dalam setahun. Redaksi menerima tulisan ilmiah hasil penelitian, kajian kepustakaan, analisis dan pemecahan permasalahan di bidang Matematika (Aljabar, Analisis, Statistika, Komputasi, dan Terapan). Naskah yang diterima akan dikilas (review) oleh ...