Two-Step Discrete Barrier Options

Posted by Chun-Yuan Chiu

Input:
Initial underlying asset price
Strike price
Time to maturity Years
Risk free interest rate (annulized)
Volatility (annulized)
Barrier
Monitor time
Option type
Output:
Option value

Derivation:

Derivation of the Pricing Formulae for 3-period Discrete Barrier Options

A closed form solution for pricing two-step discrete barrier options. The calculation is based on the Black-Scholes model.

Tagged: Barrier Option, Black-Scholes Model

 •  Jan 20, 2014  • 

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