The Pricing of Binary Options in a Financial Market with Probability Tools

In this paper we consider a Black-Scholes-Merton market in which the underling economy modelled by a special stochstic differential equation. In fact we study the pricing of binary options with probability tools when the price dynamics of the underling risky asset are assumed to follow a Markov modulated geometric Brownian motion. Then we drive closed-form solutions for binary option under considered conditions

کلیدواژه ها:

Binary option ، Contingent claim ، Black-Scholes-Merton ، Closed-form ، Geometric Brownian motion