since you can successfully price barriers, then you can price the touch/no touch with the barrier pricer with non-zero rebate. For example, no touch can be price as knock-out with non-zero rebateQuoteOriginally posted by: wonabruHi,I am working on some project related to bulding different models on options pricing. Now I stuck on having method to build touch (no-touch) options on the base on local volatility model. Till now I did pricing of barriers, double barriers, digitals and double digitals but having problems with touch. I follow this paper
http://guerin.ballarat.edu.au/ard/itms/ ... iIWIF1.pdf. I can create local volatility surface and can, with bounadary condition given in the paper, calculate rest exotics. When I try to build touches I got all the time digitals. Do you have experiences with calculating touches and double touches with local volatility model?Best...Krzysztof...