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Barrier Otions Greeks( Partial derivatives)
Posted: April 11th, 2012, 5:02 am
by quanter9
Hi All,I am working on Barrier options pricing( using closed form solutions- Reiner and Rubinstein 1991) and I want tom derive its sensitivities with partial differentiation of the closed form solutions( delta , gamma,vega, theta and Rho). As it is a tedious process, partial differentiation of above closed form solutions, Please any one help me to find the links where I can find the formulas for the barrier options Greeks.Thanks in advance for your helpRegards,
Barrier Otions Greeks( Partial derivatives)
Posted: April 11th, 2012, 6:21 am
by Cuchulainn
What about taking some simulation and numerical differentiation of the exact price to compute greeks? Worth a shot.
Barrier Otions Greeks( Partial derivatives)
Posted: April 12th, 2012, 4:32 am
by quanter9
I am doing this for a product, if closed form solutions for Greeks used in the Black Scholes world that will be more accurate than any numerical approximation.Though I am in the process deriving the Greeks for barrier using pricing formulas given in "The Complete Guide to Option Pricing Formulas, 2 edition". I am unable to understand price and Greeks when rebate is paid.Regards,Jeevan
Barrier Otions Greeks( Partial derivatives)
Posted: April 12th, 2012, 12:58 pm
by MCarreira
If you want to understand the formulas, search for the original Rubinstein articles. They explain the price formulas (and from those, after some algebra, you get the greeks).If you're going to use them in the real world (with smiles and term structures, follow Cuch's advice).