Barrier options are vanilla call and vanilla put options that are either activated or canceled based on the underlying asset hitting a certain barrier.
types of barrier options
There are three features that specify the type of barrier option:
- Down / Up. There are two sort of barrier options based on the barrier being either above (up) or below (down) the current price of the underlying.
- In / Out. The option can either be activated (in) or canceled (out) as a consequence of hitting the barrier.
- Call / Put. The two type of vanilla options
These three features result in a total of 8 different types of barrier options. E.g. a down-an-in-call is a call which is activated when the underlying moves down and hit the barrier.
List of symbols
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Value of the underlying asset at expiration
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T
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Expiration time
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K
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Strike (excersise) price
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B
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Barrier |
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