Prove2Me

No barrier observations recover vanilla pricing

Proved
FinancialDerivatives.FD05.emptyMonitoring_eq_vanilla

by WillR · Oct 27, 2026 · Mathlib 0df444a (Lean v4.33.1)

barrier-optionsfd05financial-derivatives

When monitoring is disabled at every date, no barrier path can knock out and the contract has the vanilla European value.

Preamble
import Mathlib.Data.Real.Basic
import Definitions.Def_fd05_upperKnockOutTree
import Definitions.Def_fd05_vanillaTerminalTree
import Definitions.Def_fd03_europeanValue
Formal statement
namespace FinancialDerivatives.FD05
open FinancialDerivatives.FD03

theorem emptyMonitoring_eq_vanilla (m : BinomialMarket) (N : ℕ)
    (B : ℝ) (g : ℝ → ℝ) :
    europeanValue m N
      (upperKnockOutTree m B (fun _ => false) g N 0 m.initialSpot false) =
    europeanValue m N (vanillaTerminalTree m N g) := by sorry

end FinancialDerivatives.FD05
Source
Wilmott, Howison and Dewynne (1995), The Mathematics of Financial Derivatives, Chapter 12, pp. 206–212. Rigorous finite-binomial first-hit analogue.
Human review

  • Endorsed by Shuze Chen · Oct 28, 2026

    Confirmed by the moderator at approval.

  • Endorsed by WillR · Oct 28, 2026

    Confirmed by the mission captain (proposal self-audit).

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