Barrier options

Barrier options

Option contracts that remain dormant until a trigger point (the barrier price) is reached, at which point the call or put option is activated, and results either in a long or short options position, or in the automatic exercise of an options position. One example is an up-and-in call. Assume an exercise price of $50 and a barrier price of $53. If the stock stays below $53, the call option cannot be exercised. If the stock price reaches the $53 barrier price, the holder then has a call option on the shares at $50. These are exotic options.

Barrier Option

An option contract that may only be exercised when the underlying asset reaches some barrier price. A barrier option may either be a knock-in or a knock-out. A knock-in may only be exercised when the underlying asset rises above or falls below (depending on the particular terms) the barrier price. On the other hand, a knock-out automatically expires when the underlying asset rises above or falls below the barrier price. It is important to note that the barrier price is distinct from the exercise price, though, theoretically, they may be set at the same amount. See also: Exotic option.
References in periodicals archive ?
Locals are being asked for their views on new barrier options, with one being see-through and the other a solid-style gate.
The Laplace transform methods are applied in the pricing options without early exercise features: Pelsser [2] for pricing double barrier options, Davydov and Linetsky [3] for pricing and hedging path dependent options under constant elasticity of variance (CEV) models, Sepp [4] for pricing double barrier options under double-exponential jump diffusion models, Cai and Kou [5] for pricing European options under mixed-exponential jump diffusion models, and Cai and Kou [6] for pricing Asian options under hyperexponential jump diffusion models.
AUTOBAHN is available with aluminum foil and ClearFoil[R] barrier options.
This larger tube holds up to 16 ounces and offers end-to-end and full-circumference decoration in a variety of barrier options.
Therefore, the model which incorporates multifactor stochastic volatility and stochastic interest rate maybe more reasonable for pricing barrier options.
It includes Plain Vanilla Options, Asian Options, all kinds of Barrier Options, Binary / Digital Options and Look-back Options.
Among the topics are multi-level Monte Carlo methods for applications in finance, asymptotic and non-asymptotic approximations for option valuation, discretization of backward stochastic Volterra integral equations, derivative-free weak approximation methods for stochastic differential equations, randomized multi-level quasi-Monte Carlo path simulation, applying simplest random walk algorithms for pricing barrier options, and dimension-wide decompositions and their efficient parallelization.
They are special types of knockout barrier options in which the rebate is calculated as another exotic option.
Available in multiple barrier options, they offer all the benefits of thermoformable materials plus the high-quality image of foil packages.
After reviewing the technical background, he covers simple exotic options, dual expiry options, two-asset rainbow options, barrier options, lookback options, Asian options, and exotic multi-options.
This paper examines the empirical performance of various option-pricing models in hedging exotic options, such as barrier options and compound options.
Robust static super-replication of barrier options.