Time Dependent Barrier Option Values

Journal of Futures Markets, Vol. 17, No. 6, pp. 667-688, 1997

22 Pages Posted: 8 May 2007

See all articles by Cho-Hoi Hui

Cho-Hoi Hui

Hong Kong Monetary Authority - Research Department

Abstract

Time dependent barrier options have barrier periods covering a portion of option life. This feature makes them hybrids of barrier options and ordinary European options. There are two types of time dependent barrier options: 1. front end barrier options; 2. rear end barrier options. The options are more flexible than regular barrier options for investors who hold particular views on values of foreign exchanges, equities or commodities in certain periods of time. They can be used for hedging and investment in financial market. Analytical solutions of the option values are derived in a conventional Black-Scholes option-pricing environment. Their delta, gamma and vega risks are discussed and compared with the risk factors of the ordinary options.

Keywords: barrier options, window options, time-dependent parameters

JEL Classification: F31, G13

Suggested Citation

Hui, Cho-Hoi, Time Dependent Barrier Option Values. Journal of Futures Markets, Vol. 17, No. 6, pp. 667-688, 1997. Available at SSRN: https://ssrn.com/abstract=984806

Cho-Hoi Hui (Contact Author)

Hong Kong Monetary Authority - Research Department ( email )

Hong Kong
China

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