Barrier option binomial model

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MathWorks does not warrant, and disclaims all liability for, the accuracy, suitability, or fitness for purpose of the translation. This example shows how to price a barrier option using a CRR binomial tree by loading the file deriv. The CRRTree structure contains the stock specification and time information needed to price the option. Definition of an option as 'call' or 'put' , specified as a NINST -by- 1 cell array of character vector values.

Price barrier option from Cox-Ross-Rubinstein binomial tree - MATLAB barrierbycrr - MathWorks France

Option strike price value for a European or an American Option, specified as NINST -by- 1 matrix of strike price values. Each row is the schedule for one option. Settlement or trade date for the barrier option, specified as a NINST -by- 1 matrix of serial date numbers or date character vectors.

The Settle date for every barrier is set to the ValuationDate of the stock tree. The barrier argument Settle is ignored. For a European option, use a 1 -by- 1 matrix of dates. For a European option, there is only one ExerciseDates on the option expiry date which is the maturity of the instrument. For an American option, use a 1 -by- 2 vector of exercise date boundaries. The option can be exercised on any date between or including the pair of dates on that row.

If only one non- NaN date is listed, or if ExerciseDates is a NINST -by- 1 , the option can be exercised between ValuationDate of the stock tree and the single listed date in ExerciseDates. Option type, specified as NINST -by- 1 positive integer scalar flags with values:.

Barrier option type, specified as a character vector or a cell array of character vectors with the following values:. This option becomes effective when the price of the underlying asset passes above the barrier level. Note, barrierbyfd does not support American knock-in barrier options.

This option terminates when the price of the underlying asset passes above the barrier level. Usually, with an up-and-out option, the rebate is paid if the spot price of the underlying reaches or exceeds the barrier level.

This option becomes effective when the price of the underlying stock passes below the barrier level. With a down-and-in option, the rebate is paid if the spot price of the underlying does not reach the barrier level during the life of the option. This option terminates when the price of the underlying security passes below the barrier level. Usually the option holder receives a rebate amount if the option expires worthless. Optional Rebate value, specified as a NINST -by- 1 matrix of integers.

For Knock In options, the rebate is paid at expiry.

Option Pricing - Invest Excel

For Knock Out options, the rebate is paid when the barrier is reached. Optional Derivatives pricing options, specified as structure that is created with derivset. Expected prices for barrier options at time 0, returned as a NINST -by- 1 vector.

A Barrier option has not only a strike price but also a barrier level and sometimes a rebate. A rebate is a fixed amount that is paid if the option cannot be exercised because the barrier level has been reached or not reached. The payoff for this type of option depends on whether the underlying asset crosses the predetermined trigger value barrier level , indicated by Barrier , during the life of the option.

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Examples collapse all Price a Barrier Option Using a CRR Binomial Tree. ExerciseDates, AmericanOpt, BarrierSpec, Barrier. Input Arguments collapse all CRRTree — Stock tree structure structure. Stock tree structure, specified by using crrtree. OptSpec — Definition of option character vector with values 'call' or 'put' cell array of character vectors with values 'call' or 'put'.

Strike — Option strike price value integer. Settle — Settlement or trade date serial date number date character vector. ExerciseDates — Option exercise dates serial date number date character vector. Option exercise dates, specified as a serial date number or a date character vector: AmericanOpt — Option type scalar with values 0 or 1.

Option type, specified as NINST -by- 1 positive integer scalar flags with values: BarrierSpec — Barrier option type character vector with values: Barrier option type, specified as a character vector or a cell array of character vectors with the following values: Barrier — Barrier value integer. Barrier value, specified as a NINST -by- 1 matrix.

Rebate — Rebate value 0 default integer. Options — Derivatives pricing options structure. Output Arguments collapse all Price — Expected prices for barrier options at time 0 vector. PriceTree — Structure with vector of barrier option prices at each node tree structure. Structure with a vector of barrier option prices at each node, returned as a tree structure. PTree contains the prices. More About collapse all Barrier Option A Barrier option has not only a strike price but also a barrier level and sometimes a rebate.

See Also crrtree instbarrier Topics Computing Prices Using CRR Graphical Representation of Equity Derivative Trees Pricing European Call Options Using Different Equity Models Barrier Option Pricing Options Structure Supported Equity Derivatives.

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