Double no touch option with four barriers

Question

The double no touch (also known as a range binary) is an option with two American barriers. You define one barrier above the underlying asset and one below it.

If during the option's lifetime the underlying asset:

Remains within the defined range (i.e., neither of the barriers is hit), the payout is activated. That is, the buyer of the option receives the fixed payout specified in the option on the option's delivery date in the base currency. Hits either of the two barriers, there is be no payout.

Can anyone explain about double no touch option with two barriers above the underlying asset and two below it and the assumptions. I'm very new to this field. TQ

Answer 1

You could have four barriers by using an Eachway Tunnel.

Your first three paragraphs are describing a down-and-out plus an up-and-out exotic option with two barriers. Let's call this the inner option.

Now add a layer with an outer option (with a higher and lower barrier, perhaps with the same center as the inner option).

Here you would have a full payout if the price never touches the first barrier, half payout if it touches either inner barrier, and no payout if it touches either outer barrier.