Questions tagged [barrier]
The barrier tag has no usage guidance.
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Complicated barrier options
We have the following contract consisting of barrier options:
If $S_t$ is above the barrier level $B$ during the contract duration, we receive $N\cdot \max (S_T-4.45,0), 4.45>B$ from the
bank, ...
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Barrier Reverse Convertible Coupon
I want to ask regarding Barrier Reverse Convertible,
I got this from https://bookdown.org/maxime_debellefroid/MyBook/barrier-reverse-convertibles.html
"The price of this barrier reverse ...
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Barrier option Greeks using AD
I am trying to price a Down-and-Out Barrier option using Monte Carlo and get the Greeks using autodiff as provided by PyTorch. However, comparing the output to bumping, I get vastly different values ...
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Up And Out, negative delta close to barrier
For Up And Out options, is there an intuition as to why delta becomes negative as spot approaches the barrier. Thinking in terms of replicating portfoliio I would have assumed delta is always non-...
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Fuzzy Logic - Smoothing of payoff function: Linear vs. Sigmoid
For some options such as digital and barriers it is common to use "Fuzzy Logic" to improve estimation of value and greeks. But how / when are different functions used for smoothing the ...
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Vega hedge of a barrier option
I was re-reading Lorenzo Bergomi's paper Smile Dynamics I. On the first page, he makes the point that it is necessary for a model to match the vanilla smile observed in markets in order to incorporate ...
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Estimating the knockout probability of a discretely observed autocall note
For simplicity, let's suppose the underlier follows a Geometric Brownian Motion $S_t\sim\text{GBM}(\mu, \sigma), t\ge 0$ with $S_0=1$. A discretely-observed binary autocall note is a derivative ...
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Volatility model for pricing of Down-In Put options
What is the best volatility model to price Down-In Puts (DIP) under several stress scenarios (e.g downward movement of underlying price by -5%, -10%, -15%)?
Please note that I got the market prices ...
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Pricing a Digital Barrier Option using QuantLib in Python [closed]
I'm trying to price a EURUSD digital knockout in QuantLib/Python. Ideally would like to get the same output as this stylized Bloomberg OVML model (OVML EURUSD DIKO 1.0000P B0.9500 01/13/23 N1M). I ...
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Different volatilities in Reiner Rubinstein barrier option model
Wanted to ask if a single or different volatilities should be used in Reiner-Rubinstein's option barrier pricing formulas given the following:
An Up-and-out call (Cuo) with strike K and barrier H is ...
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Gamma smoothing of vanilla options
I want to ask a question about the answer provided here: https://quant.stackexchange.com/a/35211/61083. I'm wondering if there is mathematical proof as to why it is working. Meaning if I reprice a ...
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How to price american barrier with Local-Stochastic Volatility
I have attended a conference where one speaker mentioned that the market standard to price FX and Equity derivatives is now the Local-Stochastic volatility model.
I understand this class of model is a ...
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Delta of a barrier option under Heston model
as the question stated. I want to find a way to calculate the delta for a barrier option under the Heston model. Is there any closed-form solution?
All I can find is:
Delta of a barrier, but under ...
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Single barrier options in stochastic volatility models
In this note/sketch, I derive among others a closed-form formula for an up and in put (UIP) in stochastic volatility models of the form
$$
dS(t) = \sigma(t) S(t) \left[ \rho dW(t) + \sqrt{1-\rho^2} dZ ...
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How does the issuer of a Barrier Reverse Convertible determine the coupon?
I am looking into BRC's, and I keep reading about their relatively high coupon rates which are pre-determined by the issuer. However, I can't seem to find any good resources on HOW they pre-determine ...
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