Re: [Quantlib-users] Queries on the impact of barrier hit on Barrier pricing

[Ashish B. <ash...@gm...>]

Following is the code that I am using to evaluate the barrier option. Here
if I pass the spot which has crossed the barrier for knock-in or knock-out
options, I get an error. The down-out is in the code and for down-in, I
took the example given in row# 266 of with spot price as 94 from:
https://github.com/lballabio/QuantLib/blob/master/test-suite/barrieroption.cpp

My python code:
############################################################################
import QuantLib as ql

# Setting Barrier option parameters
calculation_date = ql.Date(1, 6, 2021)
maturity_date = ql.Date(25, 11, 2021)
spot_price = 577.0
strike_price = 770.0
volatility = 43.56/100
option_type = ql.Option.Call
risk_free_rate = 0.175/100
barrier_price = 400.0
barrier_type = ql.Barrier.DownOut
rebate = 0 # no rebate
day_count = ql.Actual365Fixed()
calendar = ql.TARGET()


marketpremium = 18.64

ql.Settings.instance().evaluationDate = calculation_date

# Constructing the EU option in QL
payoff = ql.PlainVanillaPayoff(option_type, strike_price)
eu_exercise = ql.EuropeanExercise(maturity_date)
barrier_eu_option =
ql.BarrierOption(barrier_type,barrier_price,rebate,payoff, eu_exercise)

# The Black-Scholes-Merton process is constructed
spot_handle = ql.QuoteHandle(
ql.SimpleQuote(spot_price)
)
flat_rate_ts = ql.YieldTermStructureHandle(
ql.FlatForward(calculation_date,
  risk_free_rate,
  day_count)
)
flat_vol_ts = ql.BlackVolTermStructureHandle(
ql.BlackConstantVol(calculation_date,
calendar,
volatility,
day_count)
)
bs_process = ql.BlackScholesProcess(spot_handle,
  flat_rate_ts,
  flat_vol_ts)

# compute the theoretical price using the AnalyticEuropeanEngine
barrier_eu_option.setPricingEngine(ql.FdBlackScholesBarrierEngine(bs_process))
br_eu_price = barrier_eu_option.NPV()
print("The theoretical price for  EU barrier is %lf" % br_eu_price)
############################################################################

Regards,
Ashish

On Fri, 17 Jun 2022 at 02:40, Jonathan Sweemer <sw...@gm...> wrote:

> Hi Ashish, can you share your code or a link to it?
>
> 2022년 6월 17일 (금) 03:35, Ashish Bansal <ash...@gm...>님이 작성:
>
>> Hi,
>>
>> Any guidance on this error in barriers?
>>
>> Regards,
>> Ashish
>>
>> On Tue, 14 Jun 2022 at 13:03, Ashish Bansal <ash...@gm...>
>> wrote:
>>
>>> Dear team,
>>>
>>> I need some guidance on the pricing of the barrier option using
>>> the FdBlackScholesBarrierEngine in the event that the barrier is hit:
>>> 1. for Down-Out, when I pass the spot less than the barrier, I get
>>> RunTimeerror for interpolation range. Should I block the pricing at all in
>>> this case? Can't the engine handle it?
>>> 2. For Down-in, I am getting the same error whereas the option gets
>>> activated and is still live then why is this not priced by the engine? Am
>>> I doing something wrong?
>>>
>>> What is the difference between FdBlackScholesBarrierEngine
>>> and AnalyticBarrierEngine? I compared a few results and found a slight
>>> difference in values. Any suggestion on which one to use?
>>>
>>> Any help would be appreciated.
>>>
>>> Thanks
>>> Ashish
>>>
>> _______________________________________________
>> QuantLib-users mailing list
>> Qua...@li...
>> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>>
>