Electronic Journal of Applied Statistical Analysis

A Sequential Monte Carlo Approach for the pricing of barrier option in a Stochastic Volatility Model

Abstract

In this paper we propose a numerical scheme to estimate 

the price of a barrier option in a general framework. 

More precisely, we extend a classical Sequential 

Monte Carlo approach, developed under the hypothesis 

of deterministic volatility, to Stochastic Volatility models, 

in order to improve the efficiency of Standard Monte Carlo

 techniques in the case of barrier options whose underlying

 approaches the barriers. The paper concludes with the 

application of our procedure to two case studies in 

a SABR model. 

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