Pricing step-up options using laplace transform

Jerim Kim, Eyunghee Kim, Changki Kim

Research output: Contribution to journalArticlepeer-review


A step-up option is a newly developed financial instrument that simultaneously provides higher security and profitability. This paper introduces two step-up options: step-up type1 and step-up type2 options, and derives the option pricing formulas using the Laplace transform. We assume that the underlying equity price follows a regime-switching model that reflects the long-term maturity of these options. The option prices are calculated for the two types of funds, a pure stock fund composed of risky assets only and a mixed fund composed of stocks and bonds, to reflect possible variety in the fund underlying asset mix. The impact of changes in the model parameters on the option prices is analyzed. This paper provides information crucial to product developments.

Original languageEnglish
Pages (from-to)439-461
Number of pages23
JournalJournal of Applied Mathematics and Informatics
Issue number5-6
StatePublished - 2020


  • Laplace transform
  • Multi-barriers
  • Option pricing
  • Regime switching
  • Step-up option
  • barrier option


Dive into the research topics of 'Pricing step-up options using laplace transform'. Together they form a unique fingerprint.

Cite this