Questions tagged [barrier]

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Barrier option on a basket with arbitrary stochastic process

Suppose I want to price a Down-and-out European call, barrier option. However, the stochastic process is not a gBm or any other Levy process with known structure. Practically, I want a barrier option ...
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2answers
263 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 ...
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1answer
118 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 ...
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961 views

how to price barrier option under local vol model using QuantLib

I use QuantLib in Python. Now I have implied volatility surface data. How can I get the local vol surface than using finite difference method to price a barrier option in QuantLib?
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1answer
406 views

Down-Out Call and Vanilla call price

We all know from text books and practice that a knock out call is usually cheaper than a vanilla call option. Economically speaking, this comes from the fact that there is a probability bigger than ...
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1answer
125 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 ...
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1answer
247 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 ...
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0answers
28 views

How to calculate Greeks for leveraged Barrier options?

I am wondering how to calculate option Greeks for Down-and-out barrier Call options with leverage. The option characteristics are as follows. The buyer of the option pays a fraction of the spot price <...
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0answers
35 views

Barrier option with zero-strike

Good morning, everybody, I would like to know whether an up-and-out call option with a zero strike has a special name in the list of exotic options or is still a special case of a barrier option.. ...
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0answers
15 views

Static hedge for Down-and-out put option

I am trying to compute the static hedge for a down-and-out put option with the barrier above the strike using the put-call symmetry. I am okay with the example in the note with the call option but I ...
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0answers
25 views

Initial price of digital option with barrier

Given that $S_0 = 1, u = \frac{5}{4}, d = \frac{4}{5}, r = \frac{1}{40}$: The payoff of a digital option with a barrier B > S_0 on the running maximum is: 1 if $max\{S_0, ..., S_n\} \geq B$ 0 if $...
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1answer
93 views

What is the go-to method for numerical pricing of discrete barriers?

There are tons of methods for pricing discrete barrier options in various models? What is the go-to "classical" method that is most popular? Hopefully not Monte Carlo (significant accuracy would ...
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0answers
585 views

What exactly does shifting a barrier in a barrier option mean and how does it hedge delta?

How exactly is shifting the barrier to hedge delta implemented in case of barrier options. Is it just changing the barrier, if so, how does it hedge delta or is it making the barrier a range like a ...
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1answer
108 views

How to price a barrier using monte carlo when return distribution is not iid?

this question is actually related to set the stop loss and stop return. Say after a liquidity shock, I want to place two stops, one being stop loss and another being stop return. If I use, say 10 ...
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1answer
434 views

Probability of Brownian motion particle touching barrier given path starts at $X_0$ and ends at a known $X_t$

I have been reading Su and Rieger's paper on barriers and from there have been able to work out the unconditional probability of the process $dXt = μ dt + σ dWt$ touching a down barrier $α$ to be $\...
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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 ...

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