The Stack Overflow podcast is back! Listen to an interview with our new CEO.

# Questions tagged [barrier]

The tag has no usage guidance.

54 questions
Filter by
Sorted by
Tagged with
52 views

### Hindsight overhedge for pricing path dependent options

I understand how to use the longstaff schwartz method in Monte Carlo to compute the continuation value of path dependent options but someone recently mentioned another technique called "Hindsight ...
39 views

116 views

### How to price barrier options with making in model-independent way?

I have to use simple no arbitrage arguments to find the price of a barrier option where initial stock price $S_0 = 100$ and barrier/strike $B = K = 80$. Here we don't assume geometric Brownian motion ...
222 views

### Valuation of FX vs. Commodities Barrier Options

With reference to my previous question about the computation of a barrier option delta, @LocalVolatility referenced a nice closed form solution to value barrier options on a stock paying a dividend ...
201 views

### Strange Delta for FX Down And Out Call, Strike below Barrier

Based on this text about FX options on pages 139, 141 and 145 I'm trying to compute the delta of a down and out call with the strike below the barrier. Here is a quick and dirty Python code (I assume ...
272 views

### PDE of barrier and lookback options

In Shreve's book, he obtain the PDE of barrier option by Payment function $$V(T) = (S(T) - K)^+\mathbb{II}_{\{S_{\textrm{max}}(T) > B\}}$$ Then use the risk neutral pricing formula and Markov ...
107 views

### Pricing Secured Barrier Call

A European barrier call with barrier $B = 50$, expiration $T = 31$, and strike $K = 33$ costs $12$. The investor is interested in a product that, unlike this barrier call, offers some protection for ...
52 views

### Clarification on the payoff of a portfolio consisting of a long Up&In Put and short Up&In Call

I am trying to make sense of this example: I'm not following the second line in red: "If you buy an up-and-in put and sell an up-and-in call, the payoff is the strike price minus the stock price ...
582 views

### What is the probability that a Brownian Bridge hits an upper barrier $U$ before a lower barrier $L$?

The probability that an arithmetic Brownian motion process $dt = \mu dt + \sigma dW$ hits an upper Barrier $U$ before it hits a lower barrier $L$ is given by  \mathbb{P}(\tau_U\leq \tau_L) = \frac{\...
229 views

### What is the probability that a OU process hits an upper barrier U before a lower barrier L?

What is the probability that the arithmetic OU process $dx_t= \theta(\mu-x_t)dt+\sigma dW_t$ hits barrier $U$ before hitting barrier $L$ when $L<x_0<U$ ?
337 views

4k views

### Barrier option : Monte carlo simulation

I am trying to price a Down-and-Out Call using Monte Carlo simulation. The problem is that I get the right price for the vanilla option (same price as the analytic formula of Black and Scholes) but I ...
73 views

### Range options in BS

I know how barrier options are priced in Black-Scholes scheme. I'm wondering if an analytical formula exists also for range (corridor) digital options i.e. options paying only if the price remains ...