The Pricing Of Two Assets Barrier Options With Power Payoffs

From the beginning of Black-Scholes option pricing model, the option market has made a dramatic development in the mere 30 years. Capital market needs new financing instrument, and the traditional options such as American options and European options have been transformed to certain exotics as Asian options and reset options. How to design new exotics and give them reasonable price is becoming some scholars'task.This article focuses on the pricing of two assets barrier options with power payoffs. We use partial differential equation to derive option pricing model. The main work is as follows:1. Combing barrier options, multi-asset options and options with power payoffs, we get this new option. It has simple structure. Power payoffs makes profit more flexible, and the second asset becomes a barrier to control the risk. All above make the option more popular.2. Combing reference [1]-[6], we use fourier method to transform the problem to Cauchy problem, and we use Possion equation to get the pricing equation.3. We calculate four option value with matlab and mathematic, and by comparing them with each other, we conclude that two assets barrier options with power payoffs may reduce the option premium.