No touch and other exotic options - resource?

joelee · April 8th, 2012, 1:20 pm

Is there a place to find calculation methods for the following exotic options:1. no touch2. one touch 3. double no touch4. double one touchIt is relevant for FX.I found double no touch and one touch for equity in http://www.mathfinance.de/seminars/risk ... -print.pdf Thank you!Joe

MCarreira · April 9th, 2012, 12:00 am

Well, besides the online calculator at MathFinance and the (old) paper on vanna-volga pricing there, chapter 8 of Iain Clark's book describes pricing of exotics in FX. The vanna-volga approach is described in Antonio Castagna's book, with chapter 6 describing exotics.

joelee · April 9th, 2012, 8:33 am

MathFinance link you provided doesn't take into consideration both payoff and rebate of the option, but only the rebate. How come?Also, is there any other place that specifies the different calculations so it can be implemented with code?Thanks.

MCarreira · April 9th, 2012, 12:45 pm

The books below have detailed enough explanations and formulas in order to be implemented. A book that focuses on code (but not in FX) is Option Pricing Models and Volatility Using Excel-VBA.

Darou · April 9th, 2012, 9:19 pm

Uwe Wystrup is very active in the FX area: Here is another paper from him with One-Touch and Double-No_Touch Options: http://mathfinance2.com/MF_website/down ... mentRef=30

Venezia · April 24th, 2012, 11:26 am

Within short dated FX the standard methodology will be a local-stochastic volatility model with the model mix (and so the relative pricing of these exotics) determined on a per currency pair basis.

sacevoy · November 1st, 2013, 8:13 pm

not sure if this is known; probably but I stumbled on it never-the-less ...in FX using FORDOM; at expiry price (so no discounting)OT(%DOM paid a maturity)=F/B*DIGI(%FOR)+DIGI(%DOM) .. where OT and DIGI strikes B and fwd =Fworks in a black scholes framework with none IR drift i.e S=F; and supports trading intuition OT~=DIGI*2Useful hueristic

geneboo · June 16th, 2014, 8:29 am

What you mean both rebate and payoff of the option - touch options ARE rebate options that payout 1 buck... just take the price computed by the rebate option and multiply it by your rebate constant and you get some kinda rebate - which is the framework for including rebate in barrier and dbl barrier options, when multiplied by a fixed rebate amount... more like - Wystup's online calculator only does payment at maturity for his dbl touch options... and that'z cuz he calculates payout for dbl no touch, and computes dbl one touch as DF_dom - dblnotouch.