Digital Double One Touch

mtbconch · November 13th, 2007, 1:13 pm

Hi everybody,Is there an analytical formula to price a digital double one touch barrier option ? Or a combination of other exotic options that I can aproximate it ?Tks

daveangel · November 13th, 2007, 2:03 pm

I am sure the Collector's book has one

PaperCut · November 13th, 2007, 2:39 pm

QuoteOriginally posted by: mtbconchHi everybody,Is there an analytical formula to price a digital double one touch barrier option ? Or a combination of other exotic options that I can aproximate it ?TksYeah, start with Collector. But realize this is a very skew-sensitive item - you can (but shouldn't) use a closed-form. You are better off using MC - in fact you can probably do it in a spreadshett (i.e. it's not too hard)...

mtbconch · November 13th, 2007, 3:33 pm

I thought that using MC would be better. I have already done the spreadsheet but I would like to know if there was any other way to do so.Tks.

Cuchulainn · November 13th, 2007, 4:02 pm

QuoteOriginally posted by: PaperCutQuoteOriginally posted by: mtbconchHi everybody,Is there an analytical formula to price a digital double one touch barrier option ? Or a combination of other exotic options that I can aproximate it ?TksYeah, start with Collector. But realize this is a very skew-sensitive item - you can (but shouldn't) use a closed-form. You are better off using MC - in fact you can probably do it in a spreadshett (i.e. it's not too hard)...If you give me the data, I can try it on our MC/C++ code.

mtbconch · November 13th, 2007, 4:15 pm

I don't know this book. I tried to search it but I didn't find ... what is the complete name ?By the way, I know that this isn't the appropriate forum but I wanted to make a question: what are the best books of exotic options and structured derivatives that you know ?

daveangel · November 13th, 2007, 4:21 pm

Complete guide....Your might also want to look at Taleb's Dynamic Hedging

mtbconch · November 13th, 2007, 4:40 pm

Oh, I know, I know ... I will search there ...Tks

daveangel · November 13th, 2007, 7:19 pm

ok - i thought you said you didnt know the book

mtbconch · November 14th, 2007, 10:34 am

No problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorry

Cuchulainn · November 14th, 2007, 3:07 pm

QuoteOriginally posted by: mtbconchNo problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorryThis is the Collector, and I am NOT kidding. His name is Espen Haug (see his blogs in Wilmott)

Mabod · November 16th, 2007, 9:38 pm

QuoteOriginally posted by: mtbconchNo problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorryDont worry about it - Dave's posts usually confuse people

daveangel · November 17th, 2007, 12:09 pm

QuoteOriginally posted by: MabodQuoteOriginally posted by: mtbconchNo problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorryDont worry about it - Dave's posts usually confuse peopleIt seems I am not making myself clear enough to you young Mabod

Cuchulainn · November 17th, 2007, 12:13 pm

QuoteOriginally posted by: MabodQuoteOriginally posted by: mtbconchNo problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorryDont worry about it - Dave's posts usually confuse peopleEveryone here knows Collector and Dave, you rookies just haven't been around long enough here Just kidding

daveangel · November 17th, 2007, 12:58 pm

QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: MabodQuoteOriginally posted by: mtbconchNo problem. Actually, I made a mistake ... I didn't know the book with the name you said "Collector's book" ... sorryDont worry about it - Dave's posts usually confuse peopleEveryone here knows Collector and Dave, you rookies just haven't been around long enough here Just kiddingYoung Mabod is kinda sore I made disparaging remarks about Goldmans - I think he wants to work there once he is out of nappies. He has been stalking me since then.