Hi,I'm looking into pricing of double barrier options. Now I use Ikeda and Kunitomo(1992)'s model.However the model seems to be vaild only while LowTrigger < X < HiTrigger.If I'm interested in pricing a double barrier option with X outside the barriers, say LT<HT<X or X<LT<HT.Which fomula should I use?Thanks a lot.

QuoteOriginally posted by: dinnerHi,I'm looking into pricing of double barrier options. Now I use Ikeda and Kunitomo(1992)'s model.However the model seems to be vaild only while LowTrigger < X < HiTrigger.If I'm interested in pricing a double barrier option with X outside the barriers, say LT<HT<X or X<LT<HT.Which fomula should I use?Thanks a lot.you've really only got a single barrier then (assuming it's single strike).If the stock price is >HT, the only barrier it can hit is the high one.If the stock price is <LT, the only barrier it can hit is the low one.

hi ppauperthanks for ur reply, but the 'X' I meant is "strike".The spot is of course within the LoTrigger and HiTrigger.But when the strike is outside the triggers, I'm not sure if Ikeda's model still work.

QuoteOriginally posted by: dinnerhi ppauperthanks for ur reply, but the 'X' I meant is "strike".The spot is of course within the LoTrigger and HiTrigger.But when the strike is outside the triggers, I'm not sure if Ikeda's model still work.gotcha, so it's just the payoff at expiration that's different.If it were I, I'd simply repeat the Ikeda analysis with the different payoff

Hi ppauper,Thanks a lot. I have thought about your advice,but can't really figure it out.Can u kindly give me more details about that ?I really appreciate your help.

I'm interested in pricing a double barrier option with X outside the barriers, say LT<HT<X or X<LT<HT.the 'X' I meant is "strike"._________________________________________________________________________________Kunitomo and ikeda value double knockouts with no rebatesassuming that spot starts between barriers.1) if call strike X is >HT then double knockout is worthless.2) if put strike X is <LT then double knockout is worthless. 3) if put strike X is >HT then double knockout pays (X-S_T) at T if neither barrier is hit before T and it pays zero otherwise.Write (X - S_T) = (X - H_T) + (H_T - S). Their formula for double knockout put values (X - S_T) if neither barrier is hit and for LT <= X <= HT. Just differentiate their result with respect to X to get double knockout binary put, evaluate atX=H_T to move strike to H_T, multiply by X - H_T, and add the result to double knockout put value evaluated at X = H_T.4) I leave call strike < LT as an exercise....

Hi PutorCall,very,very clear....thanks for your kindly help. I've got it.