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Vega in Option with Barrier
Hi,Will Vega increase or decrease when spot price (i.e. stock price) move close to barrier set in option?And how can we know how much market price in the possibility that Fed fund rate will increase in Fed fund Futures?Thank you very much in advance
Vega in Option with Barrier
If the option is knock in, i.e. your option gets a payoff from moving beyond the barrier, price should be more sensitive to vol as it approaches barrier as it increases the probability that the option will knock in? I.e. positive vega? Pls someone correct me if wrong.Rgds,Ren.
Vega in Option with Barrier
vega will turn negative as the stock nears the barrier as the probability of jumping through the barrier increases & the pdf has more area past the barrier.
Vega in Option with Barrier
If its a knock-in option do you not want more density beyond the barrier? Am i confusing a knock-in with a knock-out or is there something else i am missing here? Intuitively, if you're in the money when you move beyond the barrier, then you'd pay more for extra density beyond the barrier.Rgds,Ren.