EXOTICS Barrier
The BarrierBS function in FinTools XL is designed for pricing barrier options, which are exotic options where the payoff depends on whether the underlying asset's price breaches a preset barrier level during its life.
Inputs
Underlying Price: The current price of the underlying asset.
Boundary Price: The price at which the option is knocked out or knocked in.
Exercise Price: The price at which the asset can be purchased if a call or sold if a put. Also known as the strike price.
Time to Expiration: Time to expiration expressed as a % of a year, ie. 0.5 is 1/2 of a year
Volatility: The annualized volatility of the underlying asset. Volatility is the standard deviation of the "relative" underlying price change.
Interest Rate: The risk-free interest rate based on the tenor to expiration.
Yield Factor: The percentage yield from the underlying asset.
Rebate Amount: The amount that is rebated back to the option holder in the event of a knockout.
Market Option Price: This input is only required when calculating implied volatility and implied strike.
Outputs
Theoretical Value The theoretical value of the option.
Delta The change in the option value given a unit change in the underlying price.
Gamma The rate of change of the delta.
Gamma (1% Change) Gamma sensitivity analysis for a 1% change in the underlying asset's price.
Theta The rate of change of the delta.
Vega The change in the option value given a 1% change in volatility.
Implied Volatility The volatility that would result in the observed market option price.
Intrinsic Value The immediate payoff of the option.
Delta 100's Delta expressed in 100's
Lambda The percent change in the option value given a 1% change in the underlying price.
Theta (-7 Days) The time decay (seven days) of the option. Market convention expresses theta as a negative number.
Rho The change in the option value given a 1% change in interest rate.
Psi The change in the option value given a 1% change in yield rate.
Strike Sensitivity The change in the option value given a unit change in the exercise price.
Implied Strike The strike price that would result in the observed market option price.